Ed has a summer beach cottage that he has owned (or many years The cottage is va

Question

Ed has a summer beach cottage that he has owned (or many years The cottage is valued at $125 000 This year Ed spends $350 on paint and $500 on trees and then paints the exterior of the cottage and plants the trees himself. If he had hired a professional painter it would have cost $1 100 to paint the cottage (not including the cost of paint) and if he had hired a professional landscaper it would have cost $450 (not inciting the cost of the trees) to do the planting How much does Eds improvements to the cottage add to GDP this year? The increase in GDP would be If Ed had hired the painter and the landscaper how would Ed's improvements to the cottage have added to GOP this year? The increase in GDP would be

Explanation / Answer

(a) Improvement in cottage would cost $(350 + 500) = $850 (Because imputed costs are excluded from GDP).

So, increase in GDP is $850.

(b) If he actually hired the painter & landscaper, total cost would be: $(850 + 1,100 + 450) = 2,400

Increase in GDP = $2,400.

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