If a larger share of household services begins to be purchased from the market measured GDP may rise. How is this related to welfare?
Answer and explanation
Correct answer: It may merely reflect a shift from non-market to market activity
GDP generally records market transactions, while unpaid household work is often omitted. If a family member previously performed childcare or cooking without payment and the same activity is later purchased from a worker, measured GDP rises because a market payment is recorded, even if the quantity of service changes little. D is correct. The change proves neither equal incomes, lower pollution, nor an equal increase in real services.
Frequently asked questions
What is the correct answer to this question?
It may merely reflect a shift from non-market to market activity
Why is this the correct answer?
GDP generally records market transactions, while unpaid household work is often omitted. If a family member previously performed childcare or cooking without payment and the same activity is later purchased from a worker, measured GDP rises because a market payment is recorded, even if the quantity of service changes little. D is correct. The change proves neither equal incomes, lower pollution, nor an equal increase in real services.
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.
