GDP underestimates our economic well-being: a) for all of the following reasons
ID: 1251960 • Letter: G
Question
GDP underestimates our economic well-being: a) for all of the following reasons b) because it includes the value of work done by nannies c) bevause it ignores leisure d) because it includes the value of work done byhouseholds e) because it includes the value of work done by illegalimmigrants GDP underestimates our economic well-being: a) for all of the following reasons b) because it includes the value of work done by nannies c) bevause it ignores leisure d) because it includes the value of work done byhouseholds e) because it includes the value of work done by illegalimmigrantsExplanation / Answer
GDP tends to underestimate theeconomic is well being because it excludes the personal labor timethat home owners is spend on home repairs.
1. Value ofhousework. (do-it-yourself):
In fact,housework is included in GDP accounts as long as it isn’tdone by a member of the households. GDP includes farmers selfconsumed food, but not the value of housework.
2. Undergroundeconomy:
The unreported(legal and illegal) productions of goods and services in theeconomy that is not counted in GDP, for instance, part time workfor cash payment is not reported (to avoid taxes), drugtrafficking, money laundering, bribery, prostitution, illegalgambling, are activities that aren’t negotiated in the marketplace.
3. Leisure:
GDPalso excludes much welfare obtained by society through theenjoyment of leisure time (e.g.) reading a book, taking a walk,playing basketball, or visiting friends.
4. Quality ofGoods and Services:
Quality improvements may notregister in our GDP accounts because the prices of the higherquality goods may actually be less than the price of the inferiorgoods they replace.
5. Cost ofEnvironmental Damage:
GDP does not measure the cost ofenvironmental damage caused from production of goods and services(e.g.) air and water pollution-noise, rush hour traffic, landpollution and so on.
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