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Assume that the total value of the following items is $600 billion in a specific year for Upper Mongoose: net exports = $50 billion; value of new goods and services produced in the underground economy = $75 billion; personal consumption expenditures = $300 billion; value of the services of stay-at-home parents = $25 billion; gross domestic investment = $100 billion; government purchases = $50 billion. What is Upper Mongoose’s GDP for the year? What is the size of the underground economy as a percentage of GDP? By what percentage would GDP be boosted if the value of the services of stay-at-home spouses were included in GDP?

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jepessoa

Answer:

What is Upper Mongoose’s GDP for the year?

GDP = consumption + investment + government expenses + net exports

GDP = $300 billion + $100 billion + $50 billion + $50 billion = $500 billion

What is the size of the underground economy as a percentage of GDP?

underground economy as % of GDP = $75 billion / $500 billion = 0.15 = 15%

By what percentage would GDP be boosted if the value of the services of stay-at-home spouses were included in GDP?

Upper Mongoose's GDP could increase by $25 billion or 5% (= $25 billion / $500 billion) if services performed by stay at home spouses would be included in the GDP

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