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A broker earns a commission on the sale of a used car. Which statement is correct regarding GDP and welfare?

Answer and explanation

Correct answer: Only the value of the brokerage service enters current GDP

GDP records current production, not every resale transaction. The used car was produced and counted in an earlier period, so its full resale price is not added again. However, the broker supplies a current service and earns a commission for it; the value of that service is included in current GDP. This accounting inclusion alone does not prove that welfare has risen.

Related tags

GdpWelfareUsed-GoodsBrokerage-ServiceGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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