1. GDP measures all the market value of all final goods and services produced in a country within a given period, usually a year. It can be used to measure the wealthiness of a country, since the more a country produces per year per capita usually means the more wealth an average person has. However, GDP is not always a good way to measure the wellbeing of people in a country. It does not measure leisure time, unreported goods and services, environment, quality of the products, and the distribution of wealth.
2. Illegal goods and services are not reported in GDP. Therefore, countries that legalizes prostitution, gambling, and some types of drugs might seem to have an advantage than a country that makes them illegal when their GDP are compared. There are also a lot of external costs to these goods/services that are not counted.
3. In 1996, Armstrong contributed the most to the GDP of the US in his cancer treatment, but also the lowest level of individual welfare, because of his sickness. His individual welfare was probably the highest during 1999-2005, because he was healthy and won the Tour de France 6 times in a row. Income and output is not always directly proportional to happiness, because the more goods and services you consume does not mean the happier you are.
4. a) none
b) none
c) in
d) in
e) out
f) none
5. When people go shopping, enjoy vacations, or spends money in other forms during their leisure time, this would be included in the GDP. However, welfare achieved during leisure time without spending money would be very hard to measure.
