Question

A woman marries her butler. Before they were married, she paid him $60,000 per year. He continues to wait on her as before (but as a husband rather than as a wage earner). She earns $1,000,000 per year both before and after her marriage. If GDP were changed so that it truly measured the sum of all final economic activity, the marriage would: first decrease and then increase GDP.
decrease GDP.
increase GDP.
leave GDP unchanged.

Answer 1

Answer:

D. Leave GDP unchanged

Explanation:

This is because the Husband is now involved in the category of "values of services not paid for". When calculating for GDP, those services aren't included or accounted for.

After marriage, the butler is no longer an employee of the woman and the services he provides for her now as an husband are not recorded as final economic activity thus the GDP decreases initially by $60,000 and then remains unchanged.