Question

Limitations of GDP 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 Brazilian wood that is used for flooring in a new U.S. house Federal government paychecks to soldiers.
b. The costs of overfishing and other overly intensive uses of resources.
c. The value of baby-sitting services, when the babysitter is paid in cash and the transaction isn't reported to the government.
d. The leisure time enjoyed by Americans

Answer 1

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

B) The costs of overfishing and other overly intensive uses of resources.

C) The value of baby-sitting services, when the babysitter is paid in cash and the transaction isn't reported to the government.

D) The leisure time enjoyed by Americans

Step-by-step explanation:

GDP is a tool that is used to measure a nation's economic performance, However, it has limitations due to its exclusion of non-market transactions.

1. The limitations identified can be summarized as:
2. GDP does not incorporate any measures of welfare.
3. GDP only includes market transactions.
4. GDP does not describe income distribution.
5. GDP does not describe what is being produced.
6. GDP ignores externalities.