GDP tends to underestimate the productive activity in the economy because it excludes:
A)spending by the government on military goods.
B)spending by businesses to reduce the level of pollution.
C)the work done by construction companies to remodel homes.
D)the personal labour time homeowners spend on home repairs.

Question

Quizplus · Accepted Answer

GDP only measures production that is exchanged in the market, so it excludes the value of unpaid work or "do-it-yourself" activities. Therefore, personal labor time homeowners spend on home repairs is not included in GDP.

GDP Tends to Underestimate the Productive Activity in the Economy