Question

Tom and Lilly rented a house for $12,000 last year. At the start of the year they bought the house they had been renting directly from the owner for $250,000. They believe they could rent it for $12,000 this year, but stay in the house. How much does Tom and Lilly’s decision to buy the house change GDP? a. it reduces GDP by $12,000 b. it raises GDP by $250,000 c. it does not change GDP d. it raises GDP by $238,000

Answer 1

Answer:

C) it does not change GDP

Explanation:

The selling of existing homes does not affect the GDP since they were built in previous years. Only the sale of newly built homes increase the GDP.

Only the services provided by real estate agents, appraisers, lawyers, etc. related to the sale of existing homes are included in the GDP.