Question: I'm confused about these two macroeconomics questions:
a. You hire an electrician to re-do the wiring in your car. You pay $100 for this service. The electrician had to buy new wire to complete the re-wiring. How does the purchase of this wire by the electrician influence GDP?
b. What if done the wiring yourself? In this case, you spent $50 on electrical supplies to complete the task. How would this influence GDP?
Answer: 1. Since the price of wire is a part of the electrician's charge, in the GDP calculation, we will only consider the income minus the cost of wire. The wire will be a part of the output calculation of the wire manufacturer's.
2. If done yourself, there will be no influence on the GDP from the servicing. The 50$ expenditure will be considered for the manufacturer of the supplies.
(We consider GDP calculation from the income method) Edit
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