Question #2303

Which nations will be considered to have the highest GDP over the year?

(a) A military-inclined nation that produces $130 billion worth of new tanks and jet fighters in addition to $100 billion worth of all other final goods and services.

(b) A nation that produces no military equipment, but instead, creates a new renewable industry that produces $200 billion worth of new solar panels, pays $20 billion out to old aged pensioners, and produces and additional $30 billion worth of all other final goods and services.

(c) A social democratic nation that produces $10 billion worth of new military equipment, builds $50 billion worth of new schools and universities, and produces an addition $170 billion worth of all other final goods and services.

(d) A nation where the government spends $40 billion in environmental restoration projects, businesses purchase new machinery and equipment worth $30 billion, export sales to the rest of the world equal $60 billion and consumers purchase $100 billion worth of final goods and services.

a
b
c
d
They all have the same level of production

Answer #11532

Answer: They all have the same level of production

Explanation

The answer is Option (e) They all have the same level of production

To answer the question, we have to calculate the real GDP in each case.

Nation A: GDP = $230 billion.

Nation B: GDP = $230 billion (we exclude the $20 billion transfer to old age pensioners).

Nation C: GDP = $230 billion.

Nation D: GDP = $230 billion.

The composition and quality of the production is very different across the 4 nations and that allowed us to have a discussion about the deficiencies of the GDP measure.

But the fact is they all record the same GDP in the year.

That is enough for today!