While estimating the current year’s GDP by the product method, which of the following is included?
Answer and explanation
Correct answer: Commission earned by a dealer for arranging the sale of an old car
GDP measures current production. The old car was counted when it was originally manufactured, so its entire resale price is not counted again. However, the dealer performs a brokerage service in the current year, and the commission is payment for that newly produced service, so it is included. Share purchases are financial transactions and pensions are transfer payments, neither of which represents current production. Thus, option C is correct.
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What is the correct answer to this question?
Commission earned by a dealer for arranging the sale of an old car
Why is this the correct answer?
GDP measures current production. The old car was counted when it was originally manufactured, so its entire resale price is not counted again. However, the dealer performs a brokerage service in the current year, and the commission is payment for that newly produced service, so it is included. Share purchases are financial transactions and pensions are transfer payments, neither of which represents current production. Thus, option C is correct.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: Methods of calculating national income - Value Added/Product Method.
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