If a Homeowner Sells a Kitchen Table and Chairs That

question 16

Multiple Choice

If a homeowner sells a kitchen table and chairs that she no longer wants to use and does not report the income earned from the sale to the Internal Revenue Service, the value of GDP is

• A) understated because this transaction took place in the underground economy.
• B) overstated because the sale of the furniture is counted twice in GDP calculations.
• C) unaffected by this transaction because the table and chairs were already counted in GDP as final goods when the homeowner bought them new.
• D) understated because this purchase was a nonmarket transaction.

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Definitions:

Extraordinary Repair

Significant restorations or overhauls that significantly extend the useful life of an asset beyond its original projection.

Manufacturing Warehouse

A facility where goods are produced or stored, typically involving both machinery and labor in the production process.

Routine Maintenance

Routine maintenance refers to the regular upkeep actions performed to keep equipment or systems functioning efficiently and prevent unforeseen breakdowns.

Accumulated Depreciation

The total amount of depreciation expenses allocated to a fixed asset since it was put into use, reducing its book value.