Economics Although GDP is a reasonably good measure of a nation\'s output, it do

Question

Economics

Although GDP is a reasonably good measure of a nation's output, it does not necessarily include all transactions and production for that nation.

Which of the following scenarios are either not accounted for or measured inaccurately by either the income or the expenditure methods of calculating GDP for the United States? Check all that apply.

The value of baby-sitting services, when the babysitter is paid in cash and the transaction isn't reported to the government

The costs of air and water pollution

Funds spent by city governments to renovate their buildings

The leisure time they have

When a US company purchases and imports wood from Brazil to use to build new houses, within the United States, this purchase increases the INVESTMENT / CONSUMPTION / GOVERNMENT PURCHASES component of GDP, while also DECREASING / INCREASING net exports by the same amount. Therefore, the purchase of wood from Brazil AN OVERALL DECREASE / NO OVERALL CHANGE / AN OVERALL INCREASE in US GDP.

Explanation / Answer

(1) The following are not accounted in GDP:

- Value of baby-sitting when paid in cash and not reported to government

- Cost of air and water pollution

- Leisure time they have

(2) When US company purchases and imports wood from Brazil, the purchases increases Investment component while also decreasing net exports (since import increases, net export decreases) by same amount. Therefore purchase of wood causes no overall change in US GDP.

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