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 Course notes quick navigation

1 Introductory concepts 2  Market mechanism  3 Elasticities  4 Market structures 5  Market failures  6  Macro economic activity/eco growth  7 Inflation 8  Employment & unemployment  9  External Stability  10  Income distribution 11.Factors affecting economy  12  Fiscal/Budgetary policy  13  Monetary Policy   14 Aggregate Supply Policies  15 The Policy Mix

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Non market activity

ABS measures of production, income and expenditure in the economy rely heavily on surveys and estimates and can never be perfectly accurate.  The inaccuracy of ABS statistics is further compromised by the existence of non-market activity that is impossible or too costly to measure.  

Non market activity refers to any economic activity that is not marketed (i.e. sold for a price). This typically includes numerous activities like home repairs, home gardening, backyard food production, etc.  Indeed, all those activities that are done privately, or at home, that could otherwise be outsourced to another party are examples of 'non-market activity'.  Whilst they do represent examples of 'economic activity' that is taking place in the economy, the ABS will not seek to estimate this activity due to the costs involved.  There are, however, some instances where the ABS will 'impute' a value for inclusion in GDP estimates. This includes government services provided free of charge (where the value is recorded at the cost of providing the service); the estimated 'rental value' of owner occupied dwellings; and the value of farm output consumed on the farm.

In addition to non-market activity, the ABS cannot accurately measure the extent of economic activity that takes place in the illegal economy (i.e. 'black market').  This includes production of illegal goods and production of goods for 'cash' (the 'cash economy').  In addition, there are other examples of 'marketed activity' that is not included in GDP estimates due to the difficulty attached to the collection of these statistics.  This includes imports that are purchased over the internet and whose value is less than $1,000.  

For all of these reasons, GDP is an underestimate of the true level of economic activity taking place in our economy.

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Click here to watch a 8 minute video on the problems with GDP as a measure of living standards