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 U.S., but there are no effects on aggregated production or on market prices of final goods and services. As a result of this, GDP _________(Decreases/ Increases/ Remains the same)

b. The U.S. government spends considerably less on antipollution efforts this year than it did in recent years. As a result of this GDP____________(Decreases/ Increases/ Remains the same)

c. The quality of cancer treatment increases, so patients undergo fewer treatments, which hosipitals continue to provide at the same price per treatment as before. As a result of this GDP___________(Decreases/ Increases/ Remains the same)

Explanation / Answer

A) GDP stays the same since GDP doesnt measure air quality.

B) GDP rises because the government is cutting costs/spending on antipollution.

C) GDP decreases for the hospital since they are giving less treatments at the same price. If they were to raise their prices to account for the loss of patients/treatments, GDP might rise or stay the same.

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