If an old machine is sold and a repair company is paid what will be included in current GDP?
Answer and explanation
Correct answer: Only the repair service produced in the current year
GDP measures current production during the reference period, not every financial transaction. A used machine was produced in an earlier period, so its resale value is not counted again as current output; otherwise the same production would be double-counted. The repair company’s service is newly produced in the current year and its payment represents current market output. Thus C is correct. A and B include the old asset again, while D wrongly excludes the current repair service.
Frequently asked questions
What is the correct answer to this question?
Only the repair service produced in the current year
Why is this the correct answer?
GDP measures current production during the reference period, not every financial transaction. A used machine was produced in an earlier period, so its resale value is not counted again as current output; otherwise the same production would be double-counted. The repair company’s service is newly produced in the current year and its payment represents current market output. Thus C is correct. A and B include the old asset again, while D wrongly excludes the current repair service.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates. Topic: GDP and Welfare.
