What main limitation is shown by generally excluding unpaid family labour from GDP?
Answer and explanation
Correct answer: Underestimation of non-market production
Unpaid family labour, such as cooking, cleaning, caring for children, or helping in a family enterprise without a recorded wage, can produce valuable goods and services. Because these activities usually do not involve market transactions with observable prices, they are generally omitted from measured GDP. Consequently, GDP may underestimate actual non-market production and cannot serve as a complete measure of welfare or economic well-being.
Frequently asked questions
What is the correct answer to this question?
Underestimation of non-market production
Why is this the correct answer?
Unpaid family labour, such as cooking, cleaning, caring for children, or helping in a family enterprise without a recorded wage, can produce valuable goods and services. Because these activities usually do not involve market transactions with observable prices, they are generally omitted from measured GDP. Consequently, GDP may underestimate actual non-market production and cannot serve as a complete measure of welfare or economic well-being.
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.
