Question

Was Robert Kennedy right? If so, why do we care about 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 oes ue to shut down for a month. t the b. The discovery of a new, easy-to-grow strain of wheat increases farm harvests. management sparks a rash of strikes. falling demand, causing them to lay off c. Increased hostility between unions and have d. Firms throughout the economy experience but workers. ng, e. Congress passes new environmental laws that prohibit firms from using production methods that emit large quantities of pollution. orce d the f. More high school students drop out of school to take jobs mowing lawns. g. Fathers around the country reduce their d as workweeks to spend more time with their

Answer 1

ans 11=

a)Actual GDP declines as Disney doesn’t produce any services whilst its closed. This corresponds to a fall in economic well-being as the income of employees & shareholders of Disney lessens (the income portion of the national a/cs), & persons’ consumption of Disney lessens (the expenditure portion of the national a/cs).

b) Actual GDP augments as the original labour & capital in agricultural production now produce more wheat. This corresponds to a rise in the economic well-being of society, as persons can now eat more wheat. (If persons don’t want to consume more wheat, then agriculturalists and farmland can be shifted to generating other commodities which society values.)

c) Actual GDP lessens as with lesser labourers on the job, companies produce less. This precisely mirrors a fall in economic well-being.

d) Actual GDP lessens as the companies which lay off employees produce less. This reduces economic well-being as laborers’ incomes decline (the income side), & there are lesser goods for populace to purchase (the expenditure side).

e) Actual GDP is expected to decline, as companies shift toward production methodologies which produce lesser goods but release low pollution. Economic well-being, though, may increase. The economy now generates less measured output but has cleaner air; unpolluted air isn’t traded in markets &, hence, doesn’t show up in measured Gross Domestic Product, but is nonetheless a good that persons’ value.

f) Actual GDP increases as the high-school pupils go from an activity wherein they aren’t producing market commodities to one wherein they are. Economic well-being, though, may fall. In ideal national a/cs, attending school would feature as an investment as it most probably augments the future productivity of the labourer. Actual national a/cs don’t measure this kind of investment. Note also that future Gross Domestic Product may be lesser than it would be if the pupils remained in school, as the future labour force will be less educated.

g) Measured actual GDP declines as fathers devote less time producing market commodities. The real production of commodities needn’t have fallen, though. Measured production (what the fathers are being paid to do) declines, but unmeasured production of child-raising services increases.