If a local shop buys a used motorcycle for $1,000,refurbishes it,and resells it for $2,500,the
A)shop contributes value added equal to $1,500,but nothing is added to GDP.
B)shop contributes value added equal to $1,500,and consequently $1,500 is added to GDP.
C)shop contributes nothing to production because only existing goods are involved.
D)shop contributes value added equal to $2,500,but only $1,500 is added to GDP.

Question

Quizplus · Accepted Answer

The shop contributes value added equal to $1,500 by refurbishing the used motorcycle, and this value is added to GDP. GDP measures the value of all final goods and services produced within a country's borders in a given period of time, and the sale of the refurbished motorcycle falls under this definition. Therefore, the correct choice is (B).

If a Local Shop Buys a Used Motorcycle for $1,000,refurbishes