Illegal trades are not capable of being counted for

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Unformatted text preview: calculation of GDP, that something has to be capable of being counted. Illegal trades are not capable of being counted, for obvious reasons. For example, when someone makes an illegal purchase, no record is made of the transaction. The criminals involved in the transaction do everything in their power to prevent anyone from knowing about the transaction. As you know, it is illegal in the United States to buy and sell drugs such as cocaine, heroin, and methamphetamine. Suppose a person pays $400 to buy some of an illegal drug. This $400 is not counted in GDP. If, however, the person spends $40 to buy a book, this $40 is counted in GDP. It is not illegal to buy a book. EXAMPLE: 290 Chapter 11 Measuring Economic Performance QUESTION: Obviously, illegal transac- tions occur in the United States every day (such as dollars exchanged for illegal drugs), and other transactions that occur are “under the table” (such as a person being paid for his services in cash instead of with a check). Do economists know wh...
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This document was uploaded on 01/16/2014.

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