Question

2. Which of the following are included and which are excluded in calculating this year’s GDP?...

2. Which of the following are included and which are excluded in calculating this year’s GDP? Explain in each instance.

(a) A homeowner who mows her own lawn

(b) A decline in the average hours worked per week

(c) Business expenditures on pollution control equipment

(d) Income from illegal drug activities

(e) The person who purchases a health care product

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Answer #1

A home owner who mows her own loan is not included in GDP because its a household activity and doesn't provide income to anyone. Also, GDP doesn't include household activities or non market transaction.

A decline in the average hours worked per week is not included in GDP.

Business expenditure on pollution control equipment is investment and therefore will be included in the GDP.

Income from illegal Drugs activities goes unreported and therefore is not calculated in GDP.

If a person purchases a health care product then it is included in GDP as Consumption expenditure.

Answer: option A, B and D are not included in the GDP. Option C and E are included in GDP.

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