If volunteers provide free services to flood victims what is correct regarding conventional GDP and social welfare?
Answer and explanation
Correct answer: The value may be unrecorded in GDP while social welfare rises
GDP generally records market transactions with observable prices. When volunteers provide services without payment, no market exchange or recorded wage may exist, so the service can be omitted from conventional GDP. Nevertheless, flood victims receive shelter, care, or assistance, which clearly raises social welfare. Hence option B is correct. A overstates GDP coverage, C reverses the welfare effect, and D misclassifies domestic voluntary work as imports.
Frequently asked questions
What is the correct answer to this question?
The value may be unrecorded in GDP while social welfare rises
Why is this the correct answer?
GDP generally records market transactions with observable prices. When volunteers provide services without payment, no market exchange or recorded wage may exist, so the service can be omitted from conventional GDP. Nevertheless, flood victims receive shelter, care, or assistance, which clearly raises social welfare. Hence option B is correct. A overstates GDP coverage, C reverses the welfare effect, and D misclassifies domestic voluntary work as imports.
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.
