What problem may occur if data from the informal sector is limited in GDP?
Answer and explanation
Correct answer: GDP estimate may be low or incomplete
GDP is calculated from reported production and income data. A large informal sector often has incomplete records, unregistered activities, and limited surveys. If its output is missed or measured inaccurately, the recorded GDP may be lower than the actual level or may not fully represent economic activity. This is a measurement problem, not an automatic change in inflation or net indirect taxes.
Frequently asked questions
What is the correct answer to this question?
GDP estimate may be low or incomplete
Why is this the correct answer?
GDP is calculated from reported production and income data. A large informal sector often has incomplete records, unregistered activities, and limited surveys. If its output is missed or measured inaccurately, the recorded GDP may be lower than the actual level or may not fully represent economic activity. This is a measurement problem, not an automatic change in inflation or net indirect taxes.
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.
