Question

A painter pays $500 for paint he uses to repaint a house. He then presents a bill for $1200 that covers his time and expenses to the homeowner. How much do these transactions add to the GDP

Answer 1

Solution and Explanation:

In value added method of GDP, the value addition at each stage of the production are added and the total value addition of any activity is added in the GDP. The total value addition is equal to the final market value of the good.

Since painter uses paint of $500 and he uses his labor for the home owner and added $700 for the repaint the houses. He gives bills of $1,200.

It means total value addition for calculating GDP will be= 500 plus 700

=$1,200