What problem occurs in measuring illegal activities in GDP?
Answer and explanation
Correct answer: Reliable data is not available
Illegal activities are generally hidden from official authorities, so transactions may not be reported and reliable records are difficult to obtain. Since GDP estimation depends on production, income, or expenditure data, missing information can lead to undermeasurement. This is a measurement limitation rather than proof that the activity has no economic value; therefore, option A is correct.
Frequently asked questions
What is the correct answer to this question?
Reliable data is not available
Why is this the correct answer?
Illegal activities are generally hidden from official authorities, so transactions may not be reported and reliable records are difficult to obtain. Since GDP estimation depends on production, income, or expenditure data, missing information can lead to undermeasurement. This is a measurement limitation rather than proof that the activity has no economic value; therefore, option A is correct.
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.
