Unmeasured Economic Activities From your everyday observatio

Unmeasured Economic Activities

From your everyday observations list two unmeasured economic activities. Now, I don\'t want anyone confessing to any criminal behavior (some of which is unmeasured economic activity) but I do want some thought put behind your answers. Your examples don\'t have to necessarily involve you directly. They can be simple observations of someone\'s behavior (corporations count too). After listing each example I want you to answer the following questions:

- Why is this activity not reflected in the GDP numbers?
- Do you feel that this example represents a \'significant\' amount of unreported output? You define what is considered to be \'significant\' and why.

Solution

Lets first see the defination of GDP. It is the total value of products/services produced in any given year. Here we are talking about the final product/services produced and all the intermediate stuff will get neglected.

There are lot of activities in our day to day life which are not considered as part of the GDP :

1. Any work done by plumbers, carpenters, maids, janitors, etc does not forms part of the GDP

In that case, these occupations are not producing any products / services. They are just helping people to solve their daily problems. For example, if you have a broken window at your home, you will call a carpenter and he will fix it. There is no product being produced.

2. Buying bonds, stocks, commodities or any other financial assets, it is also not included in the GDP.

Suppose you invest 1 lakh rupee in a company and buy its bonds of that amount. Company will show those funds as an investment and will use that funds to produce some final products. That produce is counted in GDP. Now if your investment is also consider in GDP, then it is double couting and it will misrepresent the numbers.

3. Goods and services which are being produced but not exchanged for money, are not measured in GDP

For example, if you have a garden in your backyard and you prefer growing your own food, whatever the worth of that food, it will not form part of GDP.

Except point 2, i think point 1 and point 3 are really a significant chunk of unreported output for the GDP. If we talk There is huge amount of exchange of money in this transaction which is part of the the economic activity but it is not captured,

Same with the point 3, if you are spending money and time to grow food at your backyard, it is not part of the GDP. But if you want to watch football and will go anfd buy TV, this will be part of GDP.