Question

Garage sales booming as recession grinds on

The Commerce Department report showed total retail sales across the country fell​ 0.1% in​ July, although garage sales springing up across the country are proving popular with buyers.​ Cathy, an unemployed nurse said that she uses the money she makes from her garage sales to pay bills.

​Source: Reuters, August​ 14, 2009

Where do items in the news clip appear in the U.S. National Income and Product Accounts and the circular flow of expenditure and​ income?

Choose the correct statement.

A.

​Cathy's income from garage sales appears as wage income in the U.S. National Income and Product Accounts and as the income flow from firms through factors markets to households.

B.

Expenditure on goods purchased at garage sales appears as consumption expenditure in the U.S. National Income and Product Accounts and as the expenditure flow from households through goods markets to firms.

C.

​Cathy's income from garage sales appears as wage income in the U.S. National Income and Product Accounts but does not appear as a flow in the circular flow of expenditure and income.

D.

Expenditure on goods purchased at garage sales does not appear in the U.S. National Income and Product Accounts and does not appear as a flow in the circular flow of expenditure and income.

Answer 1

Answer - Statement D is correct "Expenditure on goods purchased at garage sales does not appear in the US National Income and Product accounts and does not appear in circular flow of Expenditure and Income ". This is due to the fact that when goods were firstly bought and sold, they were included in national income and appeared as circular flow of expenditure and income.

Other statements are incorrect as income from garage goods are not the part of wages and they were previously included in national income when they were firstly sold. Also expenditure on sale of garage goods is not included in national income.

Note : Here I am assuming that expenditure does not include commission of sale and purchase of garage goods