Answered: 1. If a product or service that is…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

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1. If a product or service that is legal within our economy suddenly become illegal, how would our GDP be affected?

2. Why is GDP important?

Expert Solution

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1) If something gets banned or their production becomes illegal then it would hit the economy very hard as lots of people would lose jobs which results in a fall in consumption because they would have no money and at the same time investment would also fall as the entire production would fall.

If we see in terms of production approach, here, also we can notice two things to happen first, fall in production level and second, fall in taxes as government gets the sales tax and other taxes.