Question

In: Economics

11. Consider whether each of the following events is likely to increase or decrease real GDP....

11. Consider whether each of the following events is likely to increase or decrease real GDP. In each case, do you think the well-being of the average person in society most likely changes in the same direction as real GDP? Why or why not?

a. A hurricane in Florida forces Disney World to shut down for a month.

b. The discovery of a new, easy-to-grow strain of wheat increases farm harvests.

c. Increased hostility between unions and management sparks a rash of strikes.

d. Firms throughout the economy experience falling demand, causing them to lay off workers.

e. Congress passes new environmental laws that prohibit firms from using production methods that emit large quantities of pollution.

f. More high school students drop out of school to take jobs mowing lawns.

g. Fathers around the country reduce their workweeks to spend more time with their children.

Solutions

Expert Solution

11.

a. Decrease the real GDP, this decrease in the GDP does not affect the well being of the society as whole. The hurricane is led to the shutdown of one firm so the welfare of the people associated with this firm would only decrease. The GDP is not good indicator for the welfare of the economy, we cannot say that increase in the GDP is the increase in the happiness of all people. The enviornmental hazards such as air pollution, water pollution and etc... are not taken into account. The GDP can increase by either the increase in the prices and quantities produced in the economy so it may be misleading. The GDP is a measure of the money value of all final goods and services produced in the domestic territory of the country and not a measure of the well being.

b. real GDP increases- the new discovery will increase the production and the GDP.

c. real gdp decreases- there will be fall in the number of labourers this willl reduce the quantity produced for the firm and likely to decrease the GDP.

d. real GDP decreases- lack of aggregte demand force the firms to lay off their workers and there leading to a fall in the production.

e. real GDP decreases- the new enviornmental law force the firms to cut down their productions so that is decrease in the GDP

f. increases real GDP- this is an increase in the employment so more employment would lead to more output in the economy.

g. decreases real GDP- the increase in the leisure time reduce the woring time and there by reduce the production and results in decrease in the real GDP

Rahul Sunny answered 2 years ago
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