Volunteer services increase in an economy while market output remains constant. What is the likely effect on welfare and GDP?
Answer and explanation
Correct answer: Welfare may rise while GDP remains unchanged
The governing distinction is between market production and non-market activity. Volunteer work can provide care, education, cleaning, or community support and therefore improve people’s well-being. If it is unpaid and no market transaction occurs, its value is generally not recorded in GDP. Since the question says market output stays constant, option A is correct. The words “must” in options B, C, and D make them unjustified conclusions.
Frequently asked questions
What is the correct answer to this question?
Welfare may rise while GDP remains unchanged
Why is this the correct answer?
The governing distinction is between market production and non-market activity. Volunteer work can provide care, education, cleaning, or community support and therefore improve people’s well-being. If it is unpaid and no market transaction occurs, its value is generally not recorded in GDP. Since the question says market output stays constant, option A is correct. The words “must” in options B, C, and D make them unjustified conclusions.
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.
