Upon getting a big promotion, Sally decides to buy a house in the neighborhood she grew up in as a child. In fact, the house she buys used to belong to a neighbor of hers, and so she's certain it's in good shape and well worth the $200,000 she pays for it. The only thing Sally needs to do is replace all the gutters for $1,000, which she happily does. How will GDP be affected by Sally's recent purchases?

Question

Quizplus · Accepted Answer

The purchase of an existing house does not affect GDP as it is not a new production. However, the $1,000 spent on replacing the gutters is a new service, which increases GDP by $1,000.

Upon Getting a Big Promotion, Sally Decides to Buy a House