Suppose an apartment complex converts to a condominium (i.e., the renters become owners of their apartments). Suppose the value of the condominium owners' housing services is now the same as their former rent. What happens to GDP?
A) GDP necessarily increases.
B) GDP necessarily decreases.
C) GDP is unaffected because neither the rent nor the estimate of the value of housing services is included in GDP.
D) GDP is unaffected because previously rent was included in GDP, and now it is replaced by the estimate of the value of housing services.

Question

Quizplus · Accepted Answer

GDP is unaffected in this scenario because the measure of GDP includes housing services. When apartments are rented, the rent contributes to GDP. When apartments are converted to condominiums, the owners' use of the housing is estimated and included in GDP as housing services at a value equivalent to the rent, thus keeping GDP unchanged.

Suppose an Apartment Complex Converts to a Condominium (I