Answer to Question #286048 in Macroeconomics for Sheya

Question

Suppose a Mrs. Chakay marries her butler, Ato Tachakay. After they are married, her husband continues to wait on her as before, and she continues to support him as before (but as a husband rather than as an employee). How does the marriage affect GDP? How should it affect GDP?Justify your debate.

Answer 1

The Gross Domestic Product (GDP) is a measure of how much money and wealth is exchanged within a country. The butler's salary was paid directly by the woman while he was employed. When the two marry, he keeps his duties essentially the same and earns the same amount of money, but the money traded for his job is taken from the economy—his salary is gone, and so the overall profits of the nation's residents fall significantly. However, because GDP does not include commodities and services produced and consumed by households, the service is no longer included in the GDP after the marriage.

This is due to the fact that the husband is no longer a team member, and the service he provides will not be substituted in the firm or approximated at current prices. As a result, services are no longer valued highly, and GDP declines.