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  3. Explain: "Ms Smith diminishes the national income by marrying her cook", hi what

Explain: "Ms Smith diminishes the national income by marrying her cook", hi what

游客2025-06-21  21
问题 Explain: "Ms Smith diminishes the national income by marrying her cook", hi what way is this true by definition of GDP? Is this one of the problems with the use of GDP as a measure of social welfare?
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答案 When Ms Smith employed her cook, the meals he produced were part of his employment contract. The transaction between the two would be a market one. The value he added to the food he prepared would form part of GDP.
Once Ms Smith realised that there was more to her cook than just his meals and she married him, presumably the employment contract would fall away. Although the cook would still add the same value to the meals he prepared, he would not charge for the service nor would he render a tax return in respect of these cooking activities. The activity would now be classified as a non-market one. The activities are now "within the family" and so are not included in the national income and to that extent the act of marriage has led to a fall in GDP.
Some would equate the creation of GDP with the attainment of social welfare. However, although GDP does provide a relatively good measure of economic or material wellbeing, it is an imperfect indicator of social welfare. Neither Ms Smith’s economic nor her social wellbeing has been altered by her marriage to her cook (at least not as regards the cookery services provided by her cook/husband).
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