If use of a free artificial-intelligence service rises while its market price remains zero, which limitation of the deflator appears?
Answer and explanation
Correct answer: The full market value of consumer benefit is not recorded
A GDP deflator is constructed from recorded prices and the value of measured domestic production. A free service has a zero observed market price, even though increased use may generate substantial time savings, convenience, knowledge, or other consumer benefits. Those benefits are not fully represented by the price index or GDP. Therefore, option A correctly identifies the limitation; the other statements do not logically follow.
Frequently asked questions
What is the correct answer to this question?
The full market value of consumer benefit is not recorded
Why is this the correct answer?
A GDP deflator is constructed from recorded prices and the value of measured domestic production. A free service has a zero observed market price, even though increased use may generate substantial time savings, convenience, knowledge, or other consumer benefits. Those benefits are not fully represented by the price index or GDP. Therefore, option A correctly identifies the limitation; the other statements do not logically follow.
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.
