In a fictional three person country, if person A sells a widget to Person B for $10 and Person B sells to Person C for $12 is the GDP $12 or $22?

Question

Trying to understand what counts as GDP and how it is measured. The simplest example I can think of is to imagine a fictional three person country. Person A makes and sells a widget for $10 to person B. Clearly the gross output of this countries’ economy at this time is $10. But now if Person B sells the same widget to Person C will we consider the gross output to be $12 or $22? And why? Thanks.

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Answer 1

GDP is only new/first sale of a good. Now if person A sold the widget for $10, and then Person C sold a doohickey for $12 to person A who now had the money to afford it, GDP would be $22. That same $10 can count multiple times toward GDP