While GDP is a reasonably good measure of a nation\'s output, it does have some

Question

While GDP is a reasonably good measure of a nation's output, it does have some limitations. Which of the following are illustrations of the limitations of GDP? That is, which of these are not accounted for by either the income or expenditure methods of calculating GDP for the United States?(check all that apply) The value produced by doing your own laundry The value of leisure time The loss of enjoyment people incur when scenic land is converted to commercial use The Brazilian wood that is used for flooring in a new American house Funds spent by city governments to renovate their buildings

Explanation / Answer

1) By doing your own laundry no money is changing hands (so itunderestimates GDP) compared to taking it to a cleaner. 2) The value of leisure time (which might have high or lowvalue depending on the individual and their wages and opportunitycost) also does not figure into GDP. 3) The loss of enjoyment of scenic land also does not figureinto a transaction. 4) Assuming the Brazilian wood is purchased in an Americanflooring store would figure into GDP (because it is the value ofthe final good). 5)Funds spent by city governments which go to American(domestic) businesses to do the work would also figure in.

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