Answer to Question #50756 in Macroeconomics for bob

Question

If you sell a used book to your friend, it does not affect GDP since this transaction is part of “underground economy”.
Explain in detail: True False or Uncertain

Answer 1

The transaction of selling the used book should be deducted from GDP, because it doesn’t increase the current production level. Though it does not reflect the level of current production or can include double counting. The accounting of the sale of goods produced several years in the volume of current GDP would lead to an overestimation of output in the current year. Though the transaction of selling the used goods belongs to the “undergroundeconomy”. The statement is true.