Q1.suppose police become more efficient and we hire fewer police officers. what will happen to...

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Q1.suppose police become more efficient and we hire fewer police officers. what will happen to GDP?
Q2.assume a product improves in quality from one year to the next year and its price rises to reflect this improvement. what happens to GDP Deflator and Real GDP?
Q3. do increase in unwanted inventories on firms shelves count as inventory invested in GDP Account?
Q4.is buying an air condition an act of consumption or investment in the GDP accounts?
 what about purchase of a house?
Q5.what happens to GDP account if a Pakistani firm decides to build a plant in Dubai rather than the Pakistan?
Q6. how would an increase in a sales tax affect GDP?
Q7.is domestic investment the same as investment done in Pakistan?
Q8.why are goods and services counted in GDP at market prices. are they any disadvantage in using market price to measure productions?
Q9.explain why intermediate goods and services are not included directly in GDP. are there any circumstances under which they would be included directly?
Q10. what is the difference in the national income accounts if a firm purchases a car for an executive or the firm pays the executive an additional income to purchase a car?

David · Accepted Answer

Q1.suppose police become more efficient and we hire fewer police officers. what will happen to 
GDP?  
Answer: 
When we hire fewer police officers, total factor income will fall and hence GDP will fall. 
Q2.assume a product improves in quality from one year to the next year and its price rises to 
reflect this improvement. what happens to GDP Deflator and Real GDP?  
Answer: 
There would be no effect on Real GDP due to this improvement in quality. But nominal GDP 
will rise because of resulting increase in price level, causing GDP deflator to increase, where 
GDP deflator is defined as = (nominal GDP/real GDP)*100 
Q3. do increase in unwanted inventories on firms shelves count as inventory invested in GDP 
Account?  
Answer: 
Yes, unwanted increase in GDP will be count as inventory invested in GDP account. This is 
because it is a value addition. 
Q4.

Q1.suppose police become more efficient and we hire fewer police officers. what will happen to GDP? Q2.assume a product improves in quality from one year to the next year and its price rises to...

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