If the U.S. government wanted to, it could just say that everyone who is unemployed is “employed in job search” and receiving a paycheck for this “work,” and the government could claim that these government employees are producing “job search services.” Recall that in the official definition of GDP, government purchases (G), do not include transfer payments like unemployment checks and Social Security.
a. Would this change in the definition of GDP increase GDP? Would it improve well-being?
b. If the government permanently defined unemployed people as “employed in job search,” then over the course of a few decades as the economy fluctuated, would GDP look more volatile or less volatile than it does under the regular definition? (Hint: You might find it easier to answer if you consider GDP from the “factor income” perspective.)