Why is the sale of second-hand goods generally not added to NNP?
Answer and explanation
Correct answer: Because their value was already included in national income when they were newly produced
The resale of a second-hand car, machine, or other good does not represent current production. Its original value was recorded in national income in the year it was produced. Counting the entire resale price again would therefore cause double counting. However, a broker’s commission or a dealer’s current service charge may be included because it represents a service produced during the current period.
Frequently asked questions
What is the correct answer to this question?
Because their value was already included in national income when they were newly produced
Why is this the correct answer?
The resale of a second-hand car, machine, or other good does not represent current production. Its original value was recorded in national income in the year it was produced. Counting the entire resale price again would therefore cause double counting. However, a broker’s commission or a dealer’s current service charge may be included because it represents a service produced during the current period.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: Aggregates related to national income - NNP.
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