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How can the service from living in an owner-occupied house be included in GDP?

Answer and explanation

Correct answer: By adding imputed rent

GDP includes current services, not only transactions involving cash. An owner-occupied house provides a housing service to its owner even though no rent is actually paid. National accounting therefore estimates the rent that a similar house could earn in the market and includes that imputed rent as the value of the current housing service. The house itself is not counted again as a new good, so option B is correct.

Related tags

Imputed RentOwner Occupied HouseGdpNational AccountingGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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