Which of the following will lead to GDP underestimating our true output?
A)Mary begins a catering business.
B)James begins drawing Social Security benefits upon his retirement.
C)David accepts a position as a software specialist at Microsoft.
D)Gretchen begins an accounting and bookkeeping service in her home, accepting cash as payment, which is not reported to tax authorities.

Question

Which of the following will lead to GDP underestimating our true output?
A)​Mary begins a catering business.
B)​James begins drawing Social Security benefits upon his retirement.
C)​David accepts a position as a software specialist at Microsoft.
D)​Gretchen begins an accounting and bookkeeping service in her home, accepting cash as payment, which is not reported to tax authorities.

Quizplus · Accepted Answer

Gretchen's cash payments are not reported to the tax authorities, which means they are not reflected in GDP. This leads to an underestimation of actual output. The other choices all involve economic activity that would be included in GDP.

Which of the Following Will Lead to GDP Underestimating Our