Consider the roles of capital depreciation,home production,and the underground economy in real production.When estimating the percentage of measured GDP that these three factors would make up,how much does real production possibly differ from measured GDP?
A) Real production is about 46 percent higher than GDP.
B) Real production is about 6 percent lower than GDP.
C) Real production is about 14 percent higher than GDP.
D) Real production is about 14 percent lower than GDP.

Question

Quizplus · Accepted Answer

Capital depreciation, home production, and the underground economy are not fully captured in the conventional measures of GDP. These factors contribute to the real production in an economy but are often underreported or missed in GDP calculations. Capital depreciation is a reduction in the value of capital assets over time, which is accounted for in GDP but might not fully capture the loss in value. Home production includes goods and services produced and consumed within households, like childcare or home repairs, which are not typically included in GDP. The underground economy consists of unreported income from illegal activities or income not reported to avoid taxes, which also contributes to real production but is missed in GDP measurements. Therefore, considering these factors, real production can be significantly higher than what is measured by GDP, as these activities add value to the economy but are not captured in official statistics.

Consider the Roles of Capital Depreciation,home Production,and the Underground Economy