If a used-car dealer purchases a used car for $1,000,restores it,and resells it for $1,500,the dealer contributes
A)value added equal to $500,but nothing is added to GDP.
B)value added equal to $500,and consequently $500 is added to GDP.
C)nothing to production because only existing goods are involved.
D)value added equal to $1,500,but only $500 is added to GDP.

Question

Quizplus · Accepted Answer

The dealer added value to the used car by restoring it, which is equal to $500 ($1,500 selling price - $1,000 purchase price). This value added is included in GDP, therefore $500 is added to GDP.

If a Used-Car Dealer Purchases a Used Car for $1,000,restores