GDP excludes most nonmarket transactions. Therefore, GDP tends to:
A) Underestimate the rate of inflation in the economy
B) Overestimate the rate of inflation in the economy
C) Overestimate the amount of production of the economy
D) Underestimate the amount of production in the economy

Question

Quizplus · Accepted Answer

GDP only includes goods and services that are bought and sold in the market. Nonmarket transactions such as household production, bartering, and volunteer work are not counted in GDP. Therefore, GDP tends to underestimate the amount of production in the economy.

GDP Excludes Most Nonmarket Transactions