Q2 When things are traded in a market, or embedded in government tax statistics, they arerelatively easy to measure. Many of our measurement difficulties arise precisely becausesome of the most valuable things are not easily measurable. Gross Domestic Product (GDP)casily captures the output of washing machines, but not of happiness, health orenvironmental depreciation. Since we do not buy and sell clean air or moderatetemperatures in a marketplace, governments are not automatically collecting statistics foruse in national accounts data.People who visit France quickly leam that the French have a good quality of life, better thanyou would expect simply by looking at their GDP. They enjoy a nice climate, long lunches,access to Mediterranean beaches and little congestion since they have plenty of land inrelation to their population. They also retire at a relatively young age and, having long lifeexpectancy, spend plenty of happy years in retirement. Their GDP statistics are measuringproduction of Renault and Peugeot, and of luxuries from Louis Vuitton and Hermès, butomit plentiful leisure, lack of stress and little congestion.Similarly, the output of the police, civil service and teachers in schools is not charged forin the market and hence not automatically valued by the market. How do we measure theoutput of the police?. Typically, national income statisticians measure the inputs (the agebill of police forces, rent of police stations, the cost of using police cars and policecomputers). This is a large step in the right direction, but it is far from perfect. If society becomes more unlawful, we end up choosing to have more police to counter crime. So,GDP rises because we are spending more on the police force. But in reality, people arefeeling less happy with the greater prevalence of crime and resent having to "waste' moreresources on additional policing in order to counter the crime wave.Conversely, when we cut back the size of the army, GDP falls since less is being spent onthe military, but we are actually receiving less justification as a consequence. Think of allthis as a health warning on GNP and GDP statistics. They measure what they should be tomeasure. Unless and until electorates want to spend a lot more money collecting morecomprehensive statistics, GNP and GDP will use data already being collected annually forother purposes such as taxation.(a)Explain why some final goods and services are not included in GDP.(b)Explain the reason that the value of intermediate goods produced and sold duringthe year is not included directly as a part of GDP, but the value of intermediategoods produced and not sold is included directly as a part of GDP.

(a) The market worth of all finished goods and services generated in the economy is measured by…

feeling less happy with the greater prevalence of crime and resent having to "waste' more resources on additional policing in order to counter the crime wave. Conversely, when we cut back the size of the army, GDP falls since less is being spent on the military, but we are actually receiving less justification as a consequence. Think of all this as a health waming on GNP and GDP statistics. They measure what they should be to measure. Unless and until clectorates want to spend a lot more money collecting more comprehensive statistics, GNP and GDP will use data already being collected annually for other purposes such as taxation. (a) Explain why some final goods and services are not included in GDP. (b) Explain the reason that the value of intermediate goods produced and sold during the year is not included directly as a part of GDP, but the value of intermediate goods produced and not sold is included directly as a part of GDP.

feeling less happy with the greater prevalence of crime and resent having to "waste' more resources on additional policing in order to counter the crime wave. Conversely, when we cut back the size of the army, GDP falls since less is being spent on the military, but we are actually receiving less justification as a consequence. Think of all this as a health waming on GNP and GDP statistics. They measure what they should be to measure. Unless and until clectorates want to spend a lot more money collecting more comprehensive statistics, GNP and GDP will use data already being collected annually for other purposes such as taxation. (a) Explain why some final goods and services are not included in GDP. (b) Explain the reason that the value of intermediate goods produced and sold during the year is not included directly as a part of GDP, but the value of intermediate goods produced and not sold is included directly as a part of GDP.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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