Question

Phillip is a real estate investor. He flips homes: He buys undervalued homes and sells them at a higher price later to make a profit out of the price difference (these kind of people are called flippers). He does not do any repairs to the houses he buys. In May 2020 he bought a house built in 1997 for $1,300,000 and sold it two months later for $1,500,000. Not bad.! The real estate agent got 6% of the sale price as her commission. As a result of these transactions, the 2020 GDP increased by_________ dollars.

Answer 1

90,000

Step-by-step explanation:

Recall that, GDP which is the gross domestic product is the total monetary value of all final goods and services produce within a country geographical boundary for a period of time say one year.

In this case, since the house was built in 1997, it can't be counted as part of 2020 GDP as sale of second hand houses isn't included in GDP.

However, the commission received by the agent can be added to the current GDP.

Thus

Given that

Commission = 6% = 0.06

Sale price = 1500000.

Thus, agent fee in dollars

= 0.06 × 1500000

= $90,000

Therefore, $90,000 will be included in the GDP.