Suppose a small country is ruled by a military Junta. The government buys a new

Question

Suppose a small country is ruled by a military Junta. The government buys a new jet for $50 million. The citizens of the country grow vegetables and sell them to China as exports valued at $10 million. The local Mafia sells $30 million in illegal guns but does not report it to the government. A local chef provides cooking services to the local Mafia's "Godfather" in exchange for a place to live (barter); however, the chef receives no pay. What will the reported GDP be for this country? a. $50 million b. $60 million c. $80 million d. $90 million e. $0 Suppose a small country is ruled by a military Junta. The government buys a new jet for $50 million. The citizens of the country grow vegetables and sell them to China as exports valued at $10 million. The local Mafia sells $30 million in illegal guns but does not report it to the government. A local chef provides cooking services to the local Mafia's "Godfather" in exchange for a place to live (barter); however, the chef receives no pay. What will the reported GDP be for this country? a. $50 million b. $60 million c. $80 million d. $90 million e. $0 Suppose a small country is ruled by a military Junta. The government buys a new jet for $50 million. The citizens of the country grow vegetables and sell them to China as exports valued at $10 million. The local Mafia sells $30 million in illegal guns but does not report it to the government. A local chef provides cooking services to the local Mafia's "Godfather" in exchange for a place to live (barter); however, the chef receives no pay. What will the reported GDP be for this country? a. $50 million b. $60 million c. $80 million d. $90 million e. $0

Explanation / Answer

Correct option is (b).

Since illegal transactions and barter transactions cannot be included in GDP, reported GDP equals government purchase of jet and export.

GDP = $(50 + 10) million = $60 million

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