In which example will only the service charge be added to GDP, not the whole amount?
Answer and explanation
Correct answer: Broker commission on sale of an old house
The sale of an old house is a transfer of an existing asset, not the production of a newly created good during the current period. Therefore, the entire sale price is not counted in current GDP. However, the broker performs a current service while arranging the transaction. The broker’s commission represents the value of that newly produced service and is included in GDP. New books, buses, and bridges are current production in their stated examples.
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What is the correct answer to this question?
Broker commission on sale of an old house
Why is this the correct answer?
The sale of an old house is a transfer of an existing asset, not the production of a newly created good during the current period. Therefore, the entire sale price is not counted in current GDP. However, the broker performs a current service while arranging the transaction. The broker’s commission represents the value of that newly produced service and is included in GDP. New books, buses, and bridges are current production in their stated examples.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates.
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