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If a paid domestic worker's wage is included in GDP but unpaid household work by a family member is not, which limitation does this show?

Answer and explanation

Correct answer: Neglect of non-market services

GDP records the market value of currently produced final goods and services. A paid domestic worker provides a service exchanged in the market, so the wage is counted. Unpaid household work usually has no observable market transaction and is therefore omitted, even though it provides real usefulness and may improve household welfare. This illustrates that GDP can understate welfare by neglecting non-market services.

Related tags

Gdp LimitationsNon-Market ServicesHousehold WorkWelfareGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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