Which of the following is likely to increase measured GDP?
A)A greater number of women decide to stay at home and provide day care for their children under age 5.
B)Marijuana becomes legal to grow and sell.
C)Tax rates increase and more people attempt to underreport their income for tax purposes.
D)More people decide to do their own lawn maintenance and give up using a professional service.

Question

Quizplus · Accepted Answer

Legalizing an activity such as growing and selling marijuana moves it from the informal or black market into the formal economy, where it is recorded and taxed, thus increasing the measured GDP. Activities like home day care, underreporting income, and doing one's own lawn maintenance either do not add to GDP or move activities out of the measured economy, thereby not increasing or even potentially decreasing measured GDP.

Which of the Following Is Likely to Increase Measured GDP