If market-purchased childcare is replaced by unpaid care from a family member what difference may arise between measured GDP and actual welfare?
Answer and explanation
Correct answer: Measured GDP may fall while the actual service continues
The governing concept is the treatment of non-market household services in GDP accounting. A paid childcare service has a market transaction and is generally recorded in measured GDP. When a family member provides comparable care without payment, the useful service may continue, but no market payment is recorded, so measured GDP may decline. Hence option A is correct; the other options confuse measurement with the existence or value of the service.
Frequently asked questions
What is the correct answer to this question?
Measured GDP may fall while the actual service continues
Why is this the correct answer?
The governing concept is the treatment of non-market household services in GDP accounting. A paid childcare service has a market transaction and is generally recorded in measured GDP. When a family member provides comparable care without payment, the useful service may continue, but no market payment is recorded, so measured GDP may decline. Hence option A is correct; the other options confuse measurement with the existence or value of the service.
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.
