Question

Which of the following is not considered in the calculation of GDP?

• A. Inventory stock
• B. Wages
• C. Brokerage/commission on purchasing second-hand goods
• D. Sale/purchase of second-hand goods

Hint:

GDP only includes the value of new goods and services produced within a country. The sale or purchase of second-hand goods does not contribute to GDP as these goods have already been counted in previous periods.

Answer 1

The Correct Option is D

Topic: National Income Accounting
Understanding the Question: We need to identify which transaction does not count toward the Gross Domestic Product (GDP) of a specific year.
Key Formulas and Approach: GDP measures the value of all final, newly produced goods and services within a country's borders in a specific time period.
Detailed Solution:
Step 1: Evaluate Inventory Stock. Changes in inventory represent production that hasn't been sold yet. Since it was produced in the current year, it is included in GDP.
Step 2: Evaluate Wages. Wages are part of the income approach to calculating GDP, representing the value added by labor.
Step 3: Evaluate Commissions. Even if a good is second-hand, the service provided by the broker is a newly produced service in the current year. Thus, commissions are included.
Step 4: Evaluate Second-hand Goods. The sale of a used car or house represents a transfer of ownership, not new production. The value of that good was already counted in the GDP of the year it was originally produced.
Conclusion: Sale/purchase of second-hand goods (D) is excluded to avoid double counting.