The following transactions take place in 2000 1. An elderly couple go to the mov

Question

The following transactions take place in 2000 1. An elderly couple go to the movies and pay $120 for the tickets 2. A family sells numerous knick-knacks at a garage sale for $95 3. Ayoung executive buys 100 shares of IBM for $8,000. 4. Acollege student receives $600 from his parents. 5. Ayoung couple down on their luck receive food stamps worth $180. 6. A plumber performs work for a neighbor and receives $100 in cash that he doesn't record in his company's records. 7. A physician operates on a friend's husband and charges $1,500 for the operation instead of her usual 8. Ateenager paints the porch on his parents' house. The paint cost $85. The cost of hiring a professional to do the job would have been S400. 9. Ahigh school graduate works a summer job and makes $6,000. 10. The Federal Reserve Bank sells a bond for $1,500 The addition to gross domestic product is O A. $11,180. O B. $20,680 OC. $7,705. O D. $16,105

Explanation / Answer

Gross domestic product reflects only those transactions that involve spending on final goods and services as well as income earned in current year in legal manner.

Out of all the given transactions, following will be taken in calculation of GDP -

1. An elderly couple go to the movies and pay $120 for the tickets.

2. A physician operates on a friend's husband and charges $1,500 for the operation instead of her usual $4,000.

3. A teenager paints the porch on his parents' house. The paint cost $85. The cost of hiring a professional to do the job would have been $400.

4. A high school graduate works a summer job and makes $6,000.

Calculate GDP -

GDP = Amount spend by elderly couple + Actual amount charged by the physician + Cost of the paint + Income earned by the high school graduate

GDP = $120 + $1,500 + $85 + $6,000 = $7,705

The addition to gross domestic product is $7,705.

The correct answer is the option (c).

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