The expenditure categories of real GDP in 2017 for two countries (Hamsterville and Gerbilalia) are given below:
\begin{tabular}{lll}
Category & Spending by Hamsterville & Spending by Gerbilalia \
\hline C & $\$ 100$ & $\$ 100$ \
I & $\$ 100$ & $\$ 100$ \
G & $\$ 10$ & $\$ 10$ \
NX & $\$-10$ & $\$-10$ \
TOTAL & $\$ 150$ & $\$ 150$
\end{tabular}

An economics student doing her dissertation on economic development these two countries has noticed that the rate of capital depreciation in Hamsterville is twice as high as in Gerbilalia.

Which of the following best describes a criticism of using GDP to compa these two countries that we can infer based on this information?

Choose 1 answer:
(A) Hamsterville will grow at a slower rate because more of its investment is replacing old capital
(B) Both have trade deficits
(C) There is no criticism of GDP as a measure of output here because these two countries have identical GDP
(D) One country likely has higher levels of pollution
(E) One country has highly unequal distribution of income

Question

The expenditure categories of real GDP in 2017 for two countries (Hamsterville and Gerbilalia) are given below:
\begin{tabular}{lll} 
Category & Spending by Hamsterville & Spending by Gerbilalia \
\hline C & $\$ 100$ & $\$ 100$ \
I & $\$ 100$ & $\$ 100$ \
G & $\$ 10$ & $\$ 10$ \
NX & $\$-10$ & $\$-10$ \
TOTAL & $\$ 150$ & $\$ 150$
\end{tabular}

An economics student doing her dissertation on economic development these two countries has noticed that the rate of capital depreciation in Hamsterville is twice as high as in Gerbilalia.

Which of the following best describes a criticism of using GDP to compa these two countries that we can infer based on this information?

Choose 1 answer:
(A) Hamsterville will grow at a slower rate because more of its investment is replacing old capital
(B) Both have trade deficits
(C) There is no criticism of GDP as a measure of output here because these two countries have identical GDP
(D) One country likely has higher levels of pollution
(E) One country has highly unequal distribution of income

Accepted Answer

***A*** ∻Key Concept∻ ⚹Capital Depreciation and GDP⚹ ∻Explanation∻ ⚹GDP may not accurately reflect economic well-being if a significant portion of investment is merely replacing depreciated capital rather than adding to productive capacity. In Hamsterville, higher depreciation implies more investment is used for replacement, which could lead to slower growth compared to Gerbilalia.⚹◊How does the difference in capital depreciation rates between Hamsterville and Gerbilalia impact their GDP growth rates in the long run?⍭ Generate me a similar question◊

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