Which of the Following Will Lead to GDP Underestimating Our

question 108

Multiple Choice

Which of the following will lead to GDP underestimating our true output?

• A)​Mary begins a catering business.
• B)​James begins drawing Social Security benefits upon his retirement.
• C)​David accepts a position as a software specialist at Microsoft.
• D)​Gretchen begins an accounting and bookkeeping service in her home, accepting cash as payment, which is not reported to tax authorities.

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Definitions:

Short-Run Condition

A period in which at least one input is fixed and firms cannot fully adjust to new market conditions.

Shutting Down

A short-term decision by a firm to cease production when the market price is below variable costs, incurring losses only equal to fixed costs.

Total Revenue

The overall amount of money generated by a business from the sale of its goods or services.

Long-Run Equilibrium

A state in which supply and demand are balanced, and all firms in the industry are earning normal profits in the long term.