By the 1960s, a larger percentage of women were entering the labor force.because
ID: 1227295 • Letter: B
Question
By the 1960s, a larger percentage of women were entering the labor force.because more women were working, their production of services within the home, such as cooking and cleaning, may have fallen. in addition, they may have employed others to do some tasks that they had previously done themselves, including caring for their children.
A. How did these changes affect GDP as measured by the BEA?
B. If we define "actual GDP" as as GDP measured with the inclusion of such things as household production, illegal goods and services, and other typically excluded variables, how would actual GDP have changed?
Explanation / Answer
(A)
GDP as measured by the BEA does not include unpaid household work, illegal production of goods and services etc.
However, if women enter labor force and undertake job and thus engage in income generating activities then their efforts will shift from unpaid work to paid work.
Moreover, as women devote more time to their job, they will hire people for household work and due to this most of the household work will change from unpaid nature to paid nature.
Thus, cumulatively, quantum of paid work in economy will increase.
Since, paid work is included in measurement of GDP, this entry of women in labor force and transition of household work from unpaid to paid nature will increase the GDP as measured by the BEA.
(B)
'Actual GDP' is defined as GDP that not only paid work but also household production, illegal goods and services, and other typically excluded variables.
The entry of women in labor force has changed the nature of efforts of women from unpaid to paid. Apart from this, household work as delegated to hired workers has also become paid.
Thus, quantum of household production has remain same but its nature has changed.
This entry of women in labor force has only shifted the household production from unpaid head to paid head.
Actual GDP include both paid and unpaid household production.
Hence, actual GDP will remain unchanged.
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