The government is considering a policy to reduce air pollution by restricting the use of “dirty” fuels by factories. In deciding whether to implement the policy, how, if at all, will the likely effects of this policy impact real GDP?
a)The government purchase component of real GDP will increase due to the implementation of pollution-reducing improvements, and the consumption component will also increase due to cleaner air.
b)The cost of implementing pollution-reducing improvements will decrease real GDP due to the closing of some “dirty” factories, while the value of cleaner air will have no direct impact on real GDP.
c)The implementation of pollution-reducing improvements will increase real GDP due to increased investment, while the value of cleaner air will also have a definite positive impact on real GDP
d)The value of cleaner air will have a positive impact on real GDP; however, real GDP will be reduced due to increased investment from all the nation’s factories.