Question

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?A. The value of babysitting services, when the babysitter is paid in cash and the transaction isn't reported to the government B. The quality of goods available to consumers C. Federal government paychecks to soldiers D. The loss of enjoyment people incur when scenic land is converted to commercial use.

Answer 1

Answer:

Options (a), (b) and (d) are correct.

Explanation:

Gross domestic product refers to the total value of production of goods and services during a period of time within the boundaries of the nation. GDP of a nation also represents the standard of living of that nation. If the GDP of a nation increases then it is assumed that the standard of living of that nation also increases.

But there are some flaws or loopholes in this assumption as non-marketing activities and the underground economy makes the GDP an imperfect measure of a particular economic activity.

Is doesn't includes the quality of goods received by the consumers as it doesn't contribute towards GDP of a nation.

It doesn't takes into account the non-market activities such as self service and house work. If a person is cleaning his home then this doesn't contribute towards GDP but if he hires someone to do the same job then then this will contribute towards the calculation of GDP as it is counted as a consumption expenditure.

Loss of enjoyment will also not counted while determining the GDP.

Government pay checks to soldiers will be included in the GDP because it increases the GDP of a nation.