Question

a family hires a lawn mowing service rather than mowing the lawn themselves. the quality of...

a family hires a lawn mowing service rather than mowing the lawn themselves. the quality of the mowing is the same with the service as the family. as a result of this transaction_____.

a. measured GDP rises but the true output of the economy does not change

b. measured GDP rises but the true output of the economy decreases

c. measured GDP stays the same and the true output of the economy does not change

d. measured GDP falls but the true output of the economy does not change

e. none of the other choices is accurate
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Answer #1

Answer

Option a) is correct. Measured GDP rises but the true output of the economy does not change

Reason:

GDP measures the market value of the goods and services a nation produces. Unpaid work that people do for themselves and their families isn't traded in the marketplace, so there are no transactions to track.

Thus, in our case the work done by the family themselves earlier was not measured as part of the GDP. Once the family hires a lawn mowing service, it gets counted in the GDP. However, the output remains the same as the same amount is being produced in the economy as earlier.

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