Question

6. 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. Funds spent by city governments to renovate their buildings The value of babysitting services, when the babysitter is paid in cash and the transaction isn't reported to the government The costs of air and water pollution The variety of goods available to consumers When a U.S. company purchases and imports automotive parts from Canada to use to build cars within the United States, this purchase increases the component of GDP while also net exports by the same amount. Therefore, the purchase of automotive parts from Canada causes in US GDP.

Answer 1

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

The costs of air and water pollution

The variety of goods available to consumers

It increases investment spending by businesses

Decreasing net export

No change

Step-by-step explanation:

Gross domestic product is the sum of the goods and services produced in an economy within a given period which is usually a year.

Gross domestic product calculated using the expenditure approach = Consumption spending + Investment spending + net export + government spending

Items not included in the calculation of GDP:

1. Intermediate goods

2. Externalities e.g. pollution

3. Measures of welfare available to individuals

4. Transactions not reported to the government.

Funds spent by city governments to renovate their buildings are included in GDP as part of investment spending.

Purchase of automative parts would be included in GDP as part of investment spending. So investment spending would rise. Also, it would be recorded as an import and import is a negative function of GDP and thus net export would decrease . As a result, the increase in investment spending would be offset by the decrease in net export and there would be no change in GDP

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