Jake, Sr. sells the family business, a factory that produces snake oil, to Jake, Jr., for $100, even though the factory has been assessed at $400,000. How will this transaction affect GDP?
A) Investment will increase by $100.
B) Investment will increase by $400,000.
C) Consumption will increase by $400,000.
D) GDP will not be affected by the transaction.

Question

Quizplus · Accepted Answer

This transaction does not affect GDP as it is considered a transfer of ownership within the same family and there is no new production or income generated. The $100 payment is not considered when calculating GDP since it is not a payment for a good or service produced within the economy.

Jake, Sr Sells the Family Business, a Factory That Produces Snake