In an economy childcare was previously provided unpaid within families but is now supplied for payment by centres. Other things being equal what will happen?
Answer and explanation
Correct answer: Recorded GDP may rise while the actual quantity of service remains unchanged
GDP generally records market production, whereas unpaid household services are often outside measured GDP. When the same childcare activity moves from unpaid family work to a paid centre, measured market output and GDP can rise even if the amount and quality of care do not change. Option A is correct. B misclassifies the service, C makes an unjustified welfare claim, and D contradicts the treatment of paid final services.
Frequently asked questions
What is the correct answer to this question?
Recorded GDP may rise while the actual quantity of service remains unchanged
Why is this the correct answer?
GDP generally records market production, whereas unpaid household services are often outside measured GDP. When the same childcare activity moves from unpaid family work to a paid centre, measured market output and GDP can rise even if the amount and quality of care do not change. Option A is correct. B misclassifies the service, C makes an unjustified welfare claim, and D contradicts the treatment of paid final services.
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.
