Question

Suppose a community spends​ $1 million on salaries and equipment for its police department. Because it believes that citizens are now more law​ abiding, the community decides to cut back on the number of police it employs. As a​ result, the community now spends​ $800,000 less on the police officers. The crime rate remains the same.
What happens to measured GDP?

a. GOP increases by $800,000
b. GOP tals by $200,000.
c. GDP talls by $800,000.
d. GDP does not change

Does this change in GDP aocurately refect welfare in this case?

a. No. because the crime rate has not changed.
b. Yes, because the oommunity is spending less on police oficers
c. No because the community is spending less on police oficers.
d. Yes, because saving on the police officers can now spent on welfare

Answer 1

Answer: GDP talls by $800,000.; No. because the crime rate has not changed.

Explanation:

The gross domestic product (GDP) is the value in terms of money of every finished goods and services that are made within a country at a particular period of time. In the above question, since the community the community now spends​ $800,000 less on its police officers, expenditure will also reduce by $800,000. This means that the GDP falls by $800,000 because the gross domestic product include service expenses.

Welfare means the well-being of the individuals in the society. In this scenario, the expenses of the residents will be reduced but the crime rate remains the same. Therefore, the change in GDP does not accurately reflect the welfare.