If free treatment is provided in a government hospital, how can its value be added to GDP?
Answer and explanation
Correct answer: On the basis of government production cost or expenditure
Many government services are supplied without a market price, so their contribution cannot be valued through a normal sale price. In national income accounting, such non-market services are generally valued by the cost of producing them, including compensation of employees, medicines, maintenance, and other operating expenses. Therefore, free medical treatment is included as current government output on a cost basis, not as the patient’s saving or foreign income.
Frequently asked questions
What is the correct answer to this question?
On the basis of government production cost or expenditure
Why is this the correct answer?
Many government services are supplied without a market price, so their contribution cannot be valued through a normal sale price. In national income accounting, such non-market services are generally valued by the cost of producing them, including compensation of employees, medicines, maintenance, and other operating expenses. Therefore, free medical treatment is included as current government output on a cost basis, not as the patient’s saving or foreign income.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates.
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