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Here is an exercise from Intermediate Language Practice by Michael Vince:

Complete the following sentence with a present simple or present continuous form of the words in bold.

Pat has got an interesting hobby. __________ a boat. she build

The answer key says "She's building", but I think "She builds" is more appropriate. As I understand it, the present continuous generally indicates a temporary situation whereas the present simple indicates a more permanent one. Without any more context, I see a hobby as a fairly permanent activity, so the present simple should be used here.

Is the answer key incorrect or am I missing something?

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    With "a boat", the situation is inherently temporary, because once the boat is built, the hobby's over. If it were "she builds boats", that would be the appropriate tense. – Peter Shor Oct 20 '13 at 12:04
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    What Peter Shor says. I'd find this question objectionable on an exam, because 'hobby' and 'a' call for different constructions and there's no entirely satisfactory answer. Bottom line: ignore the first sentence and use the construction required by the sentence the ___ is in. – StoneyB Oct 20 '13 at 14:15
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    She builds boats works, because it's Generic. But she can't build a boat generically, unless it means she's the sort of person who is always working at this boat, but never finishing it. – John Lawler Oct 20 '13 at 21:28
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If it were boats, you could definitely say

Pat has got an interesting hobby. She builds boats.

However, because it's about a particular boat, you cannot build it over and over again, hence the simple present (which implies regularity, recurrence) is not very appropriate.

The present continuous, on the other hand, is not necessarily used for actions that are literally taking place at the moment of speaking. You can say

I am reading "Moby Dick".

without having the book in your hands at the moment of the utterance. Building a boat is a long process. Even though it is not necessarily uninterrupted, it is still a continuous action, hence the continuous tense should be used:

Pat has got an interesting hobby. She is building a boat.

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