Billy is a plumber. He earns $15 per hour. One morning, just before he was leaving for work, he found a pipe in his kitchen leaking. He spent two hours repairing the pipe
i) How will this affect the calculation of GDP?
ii) If Billy had spent two hours working for one of his clients, what would have been the effect of his activity on the calculation of GDP?
i) If Billy spends two hours repairing a pipe in his kitchen, he does not receive any monetary payment and his activity does not affect the calculation of GDP. This is because home production is not included in the calculation of GDP.
ii) If Billy had spent two hours working for his clients, GDP would have increased by $15 × 2 = $30.
You might also like to view...
When economists look at the percentage change in quantity demanded for air travel generated by a change in income, they are looking at the
a. price elasticity of demand for air travel b. income elasticity of demand for air travel c. price elasticity of demand for airline tickets d. cross elasticity of demand for airline tickets e. cross elasticity of demand for airline travel
Figure 7-13
Figure 7-13 shows the average total cost curves of four firms that produce milk. Some of the dairies are more productive. AR = P is the long-run price of milk. How many of these dairies will remain in the industry in the long run?
a.
all of them
b.
only 2
c.
only 3
d.
cannot determine with information given