Although gdp is a reasonably good measure of a nations...

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 quality 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. Funds spent by city governments to renovate their buildings. d. The costs of air and water pollution.

Transcript

00:01 So here we have to understand the shortcomings, or at least the limitations of gdp, right? and the first issue is raised is quality of goods.

00:11 So what is happening here? this is theoretically included, right? if goods go up in quality, we really have better goods.

00:22 It's like having more, in a sense, right? and it should be included, but measured inaccurately.

00:30 Right? this is something that is very hard to measure.

00:34 So it's clearly a problem that gdp confronts where if we can't figure out how much goods are changing in quality, it's very difficult to understand how much of an increase in price is a change in price and how much of the change in price is an increase in quality that you are really getting more for.

00:55 Right.

00:55 So this is a well -known problem in price measurement, and anything in price measurement feeds through to gdp.

01:02 In principle, it should be included, but due to it being very difficult to actually measure, it's hard for it to get built in in a way that we have total confidence in.

01:15 B, cash services, let's say cash unreported services.

01:23 This is, although it seems harmless, this is actually considered black market activity.

01:35 So this is simply not counted in gdp.

01:40 There is no way for the government to track this or to measure this or to include it.

01:46 So it's not accounted for.

01:49 There's no way for this stuff to feed in.

01:51 Now, normally when you say black markets, you think of like drugs and other really bad stuff, but this sort of cash transaction that's not reported...

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