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A woman pays her gardener £60 per year and later married him. The gardener continues to work in the garden but unpaid. The woman earns £1000 before and after the marriage. Statement: the marriage decreases GDP by £60.

My question is why the decrease? The economy still has £1000 regardless of whether it's consumed separately or combined (herself and her husband)?

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You are confusing money supply with GDP. GDP is defined as the total monetary value of all goods and services produced within the economy. For this case,

GDP = Woman's Earning + Gardeners Earning

Before Marriage = 1000 + 60 = $1060

Even though the woman has $940 she was still compensated $1000 for whatever service she provided. The money supply is 1000 but GDP is not.

Post Marriage = 1000 + 0 = $1000
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    $\begingroup$ "The money supply is 1000 but GDP is not" this is not correct. Actually post marriage GDP would be 1000 because GDP is a measure that is calculated based on goods and services sold in the market. The economy still produces 1060 output but GDP is not able to measure non-market transactions so it can only measure the gardener's output pre marriage and not post. Nothing to do with money supply whatsoever. In fact the money supply if it would be included in problem would just stay constant in this case... $\endgroup$
    – 1muflon1 ♦
    Jun 3 '20 at 20:23
  • $\begingroup$ Thank you for both of your answers. It now make sense that the GDP should be 1060 hence the decrease. $\endgroup$
    – geg
    Jun 3 '20 at 20:40

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