After the terrorist attacks on September 11, 2001, governments raised expenditures to increase security at airports. How are these purchases of goods and services treated in GDP?
A) They are not included in GDP since they are not productive.
B) They are not included in GDP since governments will have to raise taxes to pay for them.
C) They are included in GDP since government expenditures are included in GDP.
D) They are included in GDP only to the extent that the federal, but not provincial or local governments, paid for them.

Question

Quizplus · Accepted Answer

Government expenditures are included in GDP, regardless of whether they are productive or not. Therefore, purchases of goods and services to increase security at airports after the 9/11 attacks are included in GDP. The fact that governments may have to raise taxes to pay for these expenditures does not affect their inclusion in GDP.

After the Terrorist Attacks on September 11, 2001, Governments Raised