Consider whether each of the following events is likely to increase or decrease real GDP. In each case, do you think the well-being of the average person in society most likely changes in the same direction as real GDP?Why or why not? a. A hurricane in Florida forces Disney World to shut down for a month.
b. The discovery of a new, easy-to-grow strain of wheat increases farm harvests.
c. Increased hostility between unions and management sparks a rash of strikes.
d. Firms throughout the economy experience falling demand, causing them to lay of workers.
e. Congress passes new environmental laws that prohibit firms from using production methods that emit large quantities of pollution.
f. More high school students drop out of school to take jobs mowing lawns.
g. Fathers around the country reduce their workweeks to spend more time with their children.

a. A hurricane in Florida forces Disney World to shut down for a month.

Likely to decrease GDP because the economic activity of Disney World, which is part of GDP either as investment or consumption, is frozen for a whole month.

The average person will not likely feel the effects of the shutdown because as a percetange of the whole population, the amount of people who either work, or go to Disney World in a given month, is very small.

b. The discovery of a new, easy-to-grow strain of wheat increases farm harvests.

Likely to increase GDP because the harvest of wheat will be much larger, raising the value of that economic activity.

The average person is likely to benefit from this event because the larger wheat output means lower prices, and wheat is a food staple.

c. Increased hostility between unions and management sparks a rash of strikes.

Likely to decrease GDP because the companies involved in the strikes will stop their economic activity until an agreement is reached.

The average person will not feel the effects unless they are either part of the unions or part of the management of the firms involved.

e. Congress passes new environmental laws that prohibit firms from using production methods that emit large quantities of pollution.

Likely to decrease GDP because firms cannot replace their polluting methods for non-polluting ones very quickly. They will have to produce less.

The average person will feel the effects because the enviromental law comes from Congress, so is a federal law, applies nationally, and as a result, the number of firms affected is very large.

f. More high school students drop out of school to take jobs mowing lawns.

likely to increase GDP in the short-run, because students are now taking part of an economic activity. In the long-run, this is likely to decrease GDP because less educated people are less productive and thus, contribute less to GDP on average.

The average person will not feel any effects unless the number of high shcool drop outs is very large.

g. Fathers around the country reduce their workweeks to spend more time with their children.

likely to decrease GDP simply because fathers are now working less, and producing less. However, this could change if worker productivity goes up, and the fathers produce the same in less time.

Again, whether the average person feels the effects or not depends on the number of fathers that take this decision.

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