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.

a. The variety of goods available to consumers.
b. The value of babysitting services, when the babysitter is paid in cash and the transaction isn't reported to the government.
c. Expenditures on federal highways.
d. The loss of enjoyment people incur when scenic land is converted to commercial use.

When a U.S. company purchases and imports electronic parts from China to use to produce MP3 players within the United States, this purchase increases the________ component of GDP while also______ net exports by the same amount. Therefore, the purchase of electronic parts from China causes________in US GDP.

Answer 1

PART A

a. The variety of goods available to consumers.

b. The value of babysitting services, when the babysitter is paid in cash and the transaction isn't reported to the government

d. The loss of enjoyment people incur when scenic land is converted to commercial use.

PART B

When a U.S. company purchases and imports electronic parts from China to use to produce MP3 players within the United States, this purchase increases the INVESTMENT component of GDP while also DECREASING net exports by the same amount. Therefore, the purchase of electronic parts from China causes NO OVERALL CHANGE in US GDP.

Step-by-step explanation:

GDP means Gross Domestic Product.

It is used to determine the value of goods and services made in a country in respective of whether it was made a person from that country or by a foreigner during a given time.

GDP helps to determine how well the economy of a country is doing at a particular time

GDP has 4 components and they are:

a. Net Exports

b. Investment

c. Consumption

d. Government spending

PART A

Availability of a wide variety of goods, baby sitting services, and the enjoyment of scenic places are activities sometimes not accounted for or they are reported in an inaccurate way.

These activities tend to improve the lives of people and add value to the economy of a country but due to the difficulty involved in determining value these activities, they go unnoticed and unaccounted for in the GDP of a country.

PART B

When a company in the United States, purchases good and services abroad, the value of those good and services tends to result in an increase in the investment component of the GDP of the United States thereby leading to a decrease in net exports. A decrease in the net exports of a country means the country is importing more goods than they are exporting.

Therefore this increase in the investment component of the GDP of the United States due to importation of electronics from China tends to balance out the decrease in the net export thereby causing the GDP of the United States to remain the same and unchanged.