Which of the following is excluded from calculations of GDP?
A. Goods that are produced and sold during the time period.
B. Income received by managers of corporations.
C. The value of lawn mowing provided by a teenager for his own family.
D. Goods that bring little value to society.
The correct answer and explanation is :
The correct answer is C. The value of lawn mowing provided by a teenager for his own family.
Explanation:
Gross Domestic Product (GDP) is a measure of the total value of goods and services produced in an economy within a specific time period. However, not all economic activities are included in the GDP calculation. Let’s break down why C is the correct answer and examine the other options:
- A. Goods that are produced and sold during the time period.
- This option is included in GDP calculations. GDP captures the value of goods and services that are produced and sold in the market during the specified period. This includes both final goods and services, so any goods produced and sold, such as a car or a meal at a restaurant, would count toward GDP.
- B. Income received by managers of corporations.
- This option is included in GDP calculations. Income, including wages, salaries, and profits earned by individuals (like managers), is counted as part of GDP because it reflects economic activity and compensation for labor and capital. The income received by managers would be part of the overall income generation in the economy.
- C. The value of lawn mowing provided by a teenager for his own family.
- This option is excluded from GDP calculations. GDP measures the market value of goods and services produced for exchange in the market. If a teenager mows the lawn for their own family without receiving any monetary compensation or engaging in a transaction in the market, this activity is not included in GDP. This is because it is a non-market activity; there is no exchange of money or goods, and thus, it doesn’t contribute to GDP.
- D. Goods that bring little value to society.
- This option is a bit ambiguous but is generally included in GDP if they are produced and exchanged in the market. While GDP doesn’t directly account for societal value or well-being, it includes all goods and services that are traded in the market, regardless of their perceived social value. For instance, if a product is sold, even if its societal value is minimal, it still counts toward GDP.
In summary, GDP is focused on market-based economic activity, and non-market transactions (like a teenager mowing the lawn for their family) do not contribute to it. Therefore, C is the correct answer.