Indicate whether each of the following actions or impacts would increase GDP.
a. A paper company employs workers to plant trees.
b. An environmental organization provides volunteers to plant trees.
GDP is short for gross domestic product. GDP is a commonly used measure of a nation's income and level of development, but is also subject to criticism such as its exclusion of home production.
Answer and Explanation:
GDP is the total value of final goods and services produced for the market in a country or region over a specific period of time, usually a year. The highlighted text "produced for the market" means that any production or economic activity that does not transpire through the formal market place is not included in the measure of GDP.
a) This will increase GDP because it represents an economy activity that occurs in the market place.
b) This will not affect GDP because volunteers are not paid by the firm, and hence the planting of tree in this case is not a market activity. For this reason, it is not included in the measure of GDP.
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from Economics 102: MacroeconomicsChapter 4 / Lesson 3