Why is GDP an imperfect measurement of total production in the economy?

A. The official measure of GDP does not include intermediate goods and services.

B. The BEA does not include the value of new houses in GDP.

C. GDP measures total income paid to the factors of production, not production.

D. GDP does not include household production or production from the underground econom

Question

Social Studies

Gabrielle Carpenter

13 April, 01:54

Why is GDP an imperfect measurement of total production in the economy?

A. The official measure of GDP does not include intermediate goods and services.

B. The BEA does not include the value of new houses in GDP.

C. GDP measures total income paid to the factors of production, not production.

D. GDP does not include household production or production from the underground econom

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Answers (1)

Know the Answer?

Josh Gray · Answer 1

The correct answer is option D.

Explanation:

The GDP of an economy measures the value of final goods and services produced in the economy in a given period. It, however, does not include the value of the household of production of goods and services. This is because the household production does not involve transactions or exchange.

Apart from that, it also does not include the production in the underground. Since it is not reported to the government the value of underground production is not exactly known and thus cannot be included.

So the GDP does not correctly present the value of total production in the economy.