Suppose that, instead of cooking dinner for an hour you decide to work an extra hour, earning an additional $100. You then buy some food for $80.
1. By how much does measured GDP increase?
2. Does the true GDP increase by more or less?
2007-01-29 12:33:02 · 4 answers · asked by asdfoh a 1 in Social Science ➔ Economics
1. $100
2. 20% increase in GDP.
I hope that works.
2007-01-29 13:15:38 · answer #1 · answered by Rain L 5 · 0⤊ 0⤋
On a measured level, it is going to increase by $80.
This technique measures expentitures, or Consumption + Investment + Government Spending + Net Exports.
The problem states that the person only spent $80. It doesn't not say that the extra $20 was saved (which would have increased either investment or NX) so we have to assume it is sitting in a drawer or a wallet somewhere.
For the "true" GDP the answer is that it is either unchanged, or, following the above assumption, has actually decreased -- the firm has spent an additional $100, which has only translated into $80 back in the economy.
This assumes, however, that your extra hour of work did not create any value in the economy.
2007-01-30 00:31:34 · answer #2 · answered by Anonymous · 0⤊ 0⤋
a) 80 dollars
b) 20%
2007-02-02 18:35:36 · answer #3 · answered by secret society 6 · 0⤊ 0⤋
$180.00
2007-01-29 23:08:39 · answer #4 · answered by Floyd B 5 · 0⤊ 0⤋