In which situation may measured GDP rise while the actual quantity of services remains nearly unchanged?
Answer and explanation
Correct answer: When unpaid household service begins to be purchased from the market
GDP generally records market transactions with observable monetary values. When a household member performs a service without payment, it is usually outside measured GDP; if the same activity is later purchased from a market provider, a recorded expenditure and market value appear. The underlying service quantity may be nearly unchanged, but measured GDP rises because of marketisation. Thus C is correct. A and B reduce recorded market activity, while D cannot raise GDP.
Frequently asked questions
What is the correct answer to this question?
When unpaid household service begins to be purchased from the market
Why is this the correct answer?
GDP generally records market transactions with observable monetary values. When a household member performs a service without payment, it is usually outside measured GDP; if the same activity is later purchased from a market provider, a recorded expenditure and market value appear. The underlying service quantity may be nearly unchanged, but measured GDP rises because of marketisation. Thus C is correct. A and B reduce recorded market activity, while D cannot raise GDP.
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.
