A family earlier cooked food at home but now buys the same food from a restaurant. What may happen to GDP?
Answer and explanation
Correct answer: GDP will rise
GDP records the market value of final goods and services sold during production. Home cooking is generally unpaid household production and has no recorded market price, whereas a restaurant sale creates a market transaction with a measurable value. Thus the shift can increase measured GDP, so option B is correct, even though the family may be receiving a similar meal and total welfare need not rise by the same amount.
Frequently asked questions
What is the correct answer to this question?
GDP will rise
Why is this the correct answer?
GDP records the market value of final goods and services sold during production. Home cooking is generally unpaid household production and has no recorded market price, whereas a restaurant sale creates a market transaction with a measurable value. Thus the shift can increase measured GDP, so option B is correct, even though the family may be receiving a similar meal and total welfare need not rise by the same amount.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates. Topic: GDP and Welfare.
