Joe and Jim's Economic Activities
Question:
Which of the following statements is correct regarding Joe and Jim's economic activities?
- a. Joe's and Jim's grocery store purchases are included in GDP. The vegetables from Jim's backyard garden are included at their market value, if Jim provides this information.
- b. Joe's and Jim's grocery store purchases are included in GDP. The vegetables from Jim's backyard garden are included at their market value.
- c. Only Joe's and Jim's grocery store purchases are included in GDP.
- d. Only Joe's grocery store purchases are included in GDP.
Answer:
Option c: Only Joe's and Jim's grocery store purchases are included in GDP.
The correct answer to the question is c. Only Joe's and Jim's grocery store purchases are included in GDP. Gross Domestic Product (GDP) quantifies a country's total economic production by adding up all of the market transactions that occur within its borders in a given time period. This includes goods that are bought and sold in the marketplace, such as the vegetables that Joe and Jim buy at the grocery store.
However, the vegetables grown in Jim's backyard are not included in the GDP because they are not traded in the marketplace, and thus there is no meaningful way to assess their market value.