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

question 101

Multiple Choice

If a local shop buys a used motorcycle for $1,000, makes repairs and refurbishes it, then 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.

---

Definitions:

Quarterly Basis

A periodic measure or evaluation of data in intervals of three months, often used in financial reporting and performance tracking.

Reverse Stock Split

A corporate action in which a company reduces the number of its current outstanding shares to increase the per-share price, without altering the company's market capitalization.

Liquidity

The measure of how easily assets can be converted into cash without affecting their value.

Residual Dividend Policy

A strategy where a company pays dividends from the residual or leftover equity only after all project capital needs are met.