GDP is used to assess the performance of an economy; however, it is not a perfec
ID: 1161692 • Letter: G
Question
GDP is used to assess the performance of an economy; however, it is not a perfect measure of economic performance. What are some of the problems with using GDP to measure the performance of an economy?True or False: 1. The omission of the underground economy can cause GDP to be overstated 2. Household production is included in GDP 3. If GDP included the value of leisure, then measured GDP would decrease 4. GDP fails to account for economic “bads” like pollution 5. GDP reflects the distribution of income and this adequately reveals income inequality GDP is used to assess the performance of an economy; however, it is not a perfect measure of economic performance. What are some of the problems with using GDP to measure the performance of an economy?
True or False: 1. The omission of the underground economy can cause GDP to be overstated 2. Household production is included in GDP 3. If GDP included the value of leisure, then measured GDP would decrease 4. GDP fails to account for economic “bads” like pollution 5. GDP reflects the distribution of income and this adequately reveals income inequality
True or False: 1. The omission of the underground economy can cause GDP to be overstated 2. Household production is included in GDP 3. If GDP included the value of leisure, then measured GDP would decrease 4. GDP fails to account for economic “bads” like pollution 5. GDP reflects the distribution of income and this adequately reveals income inequality
Explanation / Answer
1. The omission of the underground economy can cause GDP to be overstated. False.
GDP calculation does not include the shadow economy and would understate the economic transactions.
2. Household production is included in GDP. False. Household production is not included in the calculation of GDP. People producing food for own consumption is not included.
3.If GDP included the value of leisure, then measured GDP would decrease. False. GDP would increase as the wellbeing of the person would increase.
4.GDP fails to account for economic “bads” like pollution. True.
5.GDP reflects the distribution of income and this adequately reveals income inequality False.GDP does not reflect distribution of income.
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