If household members provide unpaid cooking and later the same service is purchased from the market, what will change?
Answer and explanation
Correct answer: GDP will rise while the actual amount of service may remain unchanged
National income accounting generally excludes unpaid household production because it has no observed market transaction and price. When the same cooking is purchased from a restaurant or paid worker, its recorded market value enters GDP. The physical service may be unchanged, so measured GDP can rise without a corresponding increase in actual household satisfaction or welfare.
Frequently asked questions
What is the correct answer to this question?
GDP will rise while the actual amount of service may remain unchanged
Why is this the correct answer?
National income accounting generally excludes unpaid household production because it has no observed market transaction and price. When the same cooking is purchased from a restaurant or paid worker, its recorded market value enters GDP. The physical service may be unchanged, so measured GDP can rise without a corresponding increase in actual household satisfaction or welfare.
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.
