Question

Tina runs a timber business that harvests mature pine trees and saws them into utility poles. In a few sentences, describe the difference between how Tina's business will contribute to the traditional measure of GDP and how it would contribute to a measure of Green GDP. Include a statement on which measure makes her company's contribution to GDP larger.

Answer 1

Answer - Tina business will increase the traditional GDP as the value of the timber poles produced will be counted in the GDP of the country and will increase the value of GDP. From this , the cost of timber is the intermediate good and will be subtracted.

Now , from the perspective of the green GDP , the cost of the environmental degradation caused due to shedding of trees from timber should be considered for calculation of GDP. When this cost will be considered , the value of Real GDP will reduce because of the negative cost to the environment .

Hence the value of GDP by traditional method will give more value without considering the cost of loss to environment. Hence it will give higher value than Green GDP.