true or false: Real GDP is an imperfect measure of current output and income due to...

true or false: Real GDP is an imperfect measure of current output and income due to the fact that some productive activities are omitted because black market activities are not counted.

Expert Solution

True

Household production – This production refers to the production of goods and services by the people for themselves. Household production is not included in the GDP as theyare not bought and sold in the market.

Underground economy – This refers to the buying and selling of goods and services that is concealed form the government to avoid taxes or regulation or because good and services are illegal. Since production taking place in underground economy does not get reported due to their illegal nature or because it is concealed, it does not get counted in the value of GDP.

Even if household production and underground economy were considered in GDP, it would still be an imperfect measure of economic wellbeing because of the following:

1. Value of leisure is not included in the GDP.

2. GDP does not get adjusted for the pollution.

3. GDP is not adjusted for changes in crime and other social problems.

4. GDP only measures the size of total production but not the distribution

Rahul Sunny answered 2 years ago

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