Question

Explain what happens to the official measure of GDP in each of the following situations.
a. air quality improves significantly throughout the US but there are no effects on aggregate production or on market prices of final goods and services.
b. The US government spends considerably less on antipollution efforts this year than it did in recent years.
c. The quality of cancer treatments increases, so patients undergo fewer treatments, which hospitals continue to provide at the same price per treatment as before.

Answer 1

a) no change in GDP
b) GDP rises
c) GDP falls

Answer 2

a) no change
b) GDP falls as the U.S. Government spends less because government spending is a component of GDP
c)GDP falls

Answer 3

a,b,a