Until Recently, George Lived in a Home That Was Newly

question 30

Multiple Choice

Until recently, George lived in a home that was newly constructed in 2005. In 2005, he paid $200,000 for the brand new house. He sold the house in 2006 for $225,000. Which of the following statements is correct regarding the sale of the house?

• A) The 2006 sale increased 2006 GDP by $225,000 and had no effect on 2005 GDP.
• B) The 2006 sale increased 2006 GDP by $25,000 and had no effect on 2005 GDP.
• C) The 2006 sale increased 2006 GDP by $225,000; furthermore, the 2006 sale caused 2005 GDP to be revised upward by $25,000.
• D) The 2006 sale affected neither 2005 GDP nor 2006 GDP.

---

Definitions:

Cost Formula

An equation used to predict costs, often incorporating fixed and variable components.

Supplies Cost

The total expense incurred for items used in the operation of a business but not directly tied to a specific product or service, such as office supplies or cleaning materials.

Activity Variance

The difference between what was expected to be spent on an activity and what was actually spent, often analyzed in budgeting and cost management.

Cost Formula

A mathematical equation or model used to determine the total cost of production or service by considering various cost drivers and fixed and variable costs.