Homework #4 - GDP - ECO110 Homework#4...

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ECO 110 Homework #4 a.  Homer pays a professional carpenter $50,000 to build a garage.  This transaction is included in GDP, raising it by $50,000, because the $50,000 paid to the carpenter  represents both the cost of labor by the carpenter and the price of the goods used to build the garage,  which all count towards gross domestic product.  b.  Homer goes to the woods, cuts down a tree, and uses the wood to build himself a garage that is  worth $50,000.   This transaction is not included in GDP, because even though the garage is produced and is  hypothetically worth $50,000, it is not actually being sold on the market and this $50,000 is not being  generated from production.  c.  The Simpson family sells its old house to the Flanders family for $200,000. The Simpsons then  buy a newly constructed house from a builder for $250,000. 
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