Although GDP is a reasonably good measure of a nation\'s output, it does not nec

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? Check all that apply. The value produced by doing your own laundry Funds spent by city governments to renovate their buildings The costs of overfishing and other overly intensive uses of resources The leisure time enjoyed by households When a U.S. company purchases and imports wood from Brazil to use to build new houses within the United States, this purchase increases the component of GDP while also net exports by the same amount. Therefore, the purchase of wood from Brazil causes in US GDP.

Explanation / Answer

GDP does not necessarily include alltransactions and production in an economy.

The value of doing your own laundry is not accounted in GDP.

Funds spent by governments to renovate their building is properly accounted for in GDP.

The costs of overfishing and other overly intensive uses of resources is either not accounted or measured inaccurately in the calculation of GDP.

The leisure time enjoyed by households is not accounted for in GDP.

When a US company imports wood from Brazil to use to build new houses, then this is an investment expenditure and so this purchase increases investment component of GDP while also reducing net exports by the same amount since net exports=Ezports-imports and when import increases then net export falls. Therefore, the purchase of wood from Brazil causes no change in US GDP

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