Question

5. Limitations of GDP 

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 Canada? Check all that apply. 

The costs of overfishing and other overly intensive uses of resources 

Federal highway payments 

The value of baby-sitting services, when the baby sitter is paid in cash and the transaction isn't reported to the government 

The variety of goods available to consumers 

When a Canadian company purchases and imports electronic parts from China to use to produce MP3 players, within Canada, this purchase increases the _______  component of GDP, while also _______  net exports by the same amount. Therefore, the purchase of electronic parts from China causes _______  in Canadian GDP.

Answer 1

Cost of overfishing and other overly intensive use of resources is not included in GDP. Cost of production is not included whereas the value of final goods and services is included in GDP.

When a Canadian purcahses and imports electronic parts from China to use to produce MP3 players, within Canada, this purcahse increases the consumption component of GDP while also decreases the net exports by the same amount. Therefore, purchase of electronic parts from China causes no change in Canadian GDP.

While calculating GDP, only those goods are included that are produced domestically.

Answer 2

A.

•  The variety of goods available to consumers

• The value of babysitting services, when the babysitter is paid in cash and the transaction isn't reported to the government

• The loss of enjoyment people incur when scenic land is converted to commercial use

B. investment   decreasing    no overall change