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Measuring Total Output and Income

6.3 GDP and Economic Well-Being

ANSWER TO TRY IT! PROBLEM

  1. Real GDP would increase. Assuming the people chose to increase their work effort and forgo the extra leisure, economic well-being would increase as well.
  2. Real GDP would increase, but the extra expenditure in the economy was due to an increase in something "bad," so economic well-being would likely be lower.
  3. No change in real GDP. For some people, economic well-being might increase and for others it might decrease, since inflation does not affect each person in the same way.