If voluntary community service increases and the need for market services declines how may recorded GDP and actual welfare change?
Answer and explanation
Correct answer: Recorded GDP may fall while actual welfare rises
GDP counts many paid market transactions but generally does not assign the full market value of unpaid voluntary work. If volunteers replace purchased services, recorded expenditure and GDP may decline even though people receive valuable care, support, and community benefits. Thus welfare can improve while measured GDP falls, making option B correct. The words “may” and “actual welfare” prevent the absolute claims in the other options.
Frequently asked questions
What is the correct answer to this question?
Recorded GDP may fall while actual welfare rises
Why is this the correct answer?
GDP counts many paid market transactions but generally does not assign the full market value of unpaid voluntary work. If volunteers replace purchased services, recorded expenditure and GDP may decline even though people receive valuable care, support, and community benefits. Thus welfare can improve while measured GDP falls, making option B correct. The words “may” and “actual welfare” prevent the absolute claims in the other options.
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.
