If a country replaces free public education with paid private education while the quantity of education remains the same, why may measured GDP rise?
Answer and explanation
Correct answer: Because more services are recorded at market prices
The issue is valuation, not necessarily a change in the quantity or quality of education. Market education is recorded using observed fees or prices, while many government-provided non-market services are commonly valued by their production cost. A switch to paid private provision can therefore make a larger monetary value visible in GDP even when the amount of education is unchanged. Option C is correct; quality is not guaranteed and public services are not always excluded.
Frequently asked questions
What is the correct answer to this question?
Because more services are recorded at market prices
Why is this the correct answer?
The issue is valuation, not necessarily a change in the quantity or quality of education. Market education is recorded using observed fees or prices, while many government-provided non-market services are commonly valued by their production cost. A switch to paid private provision can therefore make a larger monetary value visible in GDP even when the amount of education is unchanged. Option C is correct; quality is not guaranteed and public services are not always excluded.
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.
