Question

Which statement is correct about GDP?

Group of answer choices

If unemployment falls, GDP will not change

If investment increases, GDP will decrease

If consumption falls, GDP will increase.

If unemployment increases, GDP will decrease

Answer 1

Answer. (d) If unemployment increases, GDP will decrease.

Explanation: GDP counts the value of new goods and services generated in an economy, the value of net exports, the profits and investments that firms make, and the incomes that people earn. The last option is correct because when unemployment will increase, more people will not have work. This would reduce the total income earned by all people in the economy. Thus it will reduce GDP. The first option is incorrect because if unemployment falls, more people will earn and hence sum of all incomes will increase, thus GDP should increase. The second option is incorrect because if investment increases, it will produce more goods and services, and also employ new and more people. Thus GDP should increase. The third option is incorrect because if consumption falls, the sales of malls,shops,various industries would go down and thus it would reduce income of workers and owners of those malls, shops and industries, Thus GDP should fall.