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If a free digital service has a zero market price, which limitation of the GDP deflator appears?

Answer and explanation

Correct answer: The full value of its consumer benefit may not appear

The GDP deflator is constructed from prices and quantities of measured domestic output. A free digital service can provide substantial convenience, information, or consumer surplus even when its recorded market price is zero. Because no conventional transaction price captures that benefit, the deflator and GDP statistics may fail to reflect its full value. Thus option A is correct; the other choices do not follow from a zero price.

Related tags

Free Digital ServicesGdp LimitationConsumer SurplusGdp DeflatorGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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