Question

Ralph pays a lawn service company to mow his lawn, while Mike mows his own lawn. Regarding these two practices, which of the following statements is correct?

a) Both Ralph and Mike contribute equally to GDP.
b) Only Ralph's payment to the lawn service company contributes to GDP.
c) Only Mike's effort in mowing his lawn contributes to GDP.
d) Neither Ralph nor Mike contributes to GDP.

Answer 1

Only Ralph's payment to the lawn service company contributes to GDP as it is a market transaction, unlike Mike's own effort which is not included in GDP calculations.

Step-by-step explanation:

Ralph pays a lawn service company to mow his lawn while Mike mows his own lawn. The correct statement regarding their contributions to GDP is: Only Ralph's payment to the lawn service company contributes to GDP. This is because GDP includes only production that is exchanged in the market. Ralph's payment is an economic transaction contributing to market activity, whereas Mike's effort, although it results in the same end product, does not involve a market transaction and is not included in GDP.