Beautiful Boating purchases five new boats at $200 thousand each to rent to vacationing fishermen.The firm sells its old boats to the public for $500 thousand.The net increase in GDP of these transactions was

Question

Quizplus · Accepted Answer

The purchase of the new boats for $200 thousand each represents a total expenditure of:
$200,000 x 5 = $1,000,000
This amount represents the contribution to GDP. Additionally, the sale of the old boats to the public for $500 thousand also contributes to GDP:
$500,000 x 5 = $2,500,000
Therefore, the net increase in GDP is the sum of the contributions from the purchase and the sale:
$1,000,000 + $2,500,000 = $3,500,000
However, the question is asking for the net increase, which means that we need to subtract the cost of the new boats from this figure:
$3,500,000 - ($200,000 x 5) = $2,500,000
Therefore, the answer is B) $1,000,000.

Beautiful Boating Purchases Five New Boats at $200 Thousand Each