Until recently, George lived in a home that was newly constructed in 2005. In 2005, he paid $200,000 for the brand new house. He sold the house in 2006 for $225,000. Which of the following statements is correct regarding the sale of the house?
a. The 2006 sale increased 2006 GDP by $225,000; furthermore, the 2006 sale caused 2005 GDP to be revised upward by $25,000.
b. The 2006 sale increased 2006 GDP by $25,000 and had no effect on 2005 GDP.
c. The 2006 sale increased 2006 GDP by $225,000 and had no effect on 2005 GDP.
d. The 2006 sale affected neither 2005 GDP nor 2006 GDP.

The 2006 sale did not affect the 2005 GDP because the value of the house was already computed in 2005, when the house was actually built. In other words, the house is only part of GDP when it is built and sold for the first time, not when it is sold for the second time.

This is why the 2006 sale did not affect the 2006 GDP: the sale of a used house is never part of GDP.

Tundexi Tundexi · Answer 2 · 2022-01-04T13:05:31+01:00

The true statements regarding the house sale is that the 2006 sale increased 2006 GDP by $225,000 and had no effect on 2005 GDP.

The GDP means Gross domestic product which entails the total value of domestically produced goods and services

The 2006 sale will not affect the 2005 GDP because the value of the house was already computed in 2005.

However, the 2006 sales will increase the 2006 GDP by $225,000 because its forms part of the nation cash-flow.

Hence, the true statements regarding the house sale is that the 2006 sale affected neither 2005 GDP nor 2006 GDP.

Therefore, the Option C is correct.