Explain what happens to the official measure of GDP in each of the following sit

Question

Explain what happens to the official measure of GDP in each of the following situations. a. Air quality improves significantly throughout the United States, but there are no effects on aggregate production or on market prices of final goods and services. b. The U.S. government spends considerably less on antipollution efforts this year than it did in recent years. c. The quality of cancer treatments increases, so patients undergo fewer treatments, which hospitals continue to provide at the same price per treatment as before.

Explanation / Answer

A) since there is no change in production or the market prices, there is no change in GDP B) The government spends less on the production of all goods and services involved in antipollution efforts, and this reduces GDP by the amount of the reduction C) The number of cancer treatments supplied decreases, but the prices stay the same so GDP decreases by the change in the number of treatments times the price.

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