Why is a paid domestic worker's wage included in GDP but a similar household service performed by a homemaker is not?
Answer and explanation
Correct answer: Because the homemaker's service is not a market transaction
GDP generally records goods and services that are produced for market exchange and have an observable monetary value. A paid domestic worker provides a service that is bought by the household, so the wage is recorded as expenditure and income. A homemaker may provide an equally valuable unpaid service, but there is no market transaction or recorded price. Consequently, national accounts usually exclude it, even though its welfare value is real.
Frequently asked questions
What is the correct answer to this question?
Because the homemaker's service is not a market transaction
Why is this the correct answer?
GDP generally records goods and services that are produced for market exchange and have an observable monetary value. A paid domestic worker provides a service that is bought by the household, so the wage is recorded as expenditure and income. A homemaker may provide an equally valuable unpaid service, but there is no market transaction or recorded price. Consequently, national accounts usually exclude it, even though its welfare value is real.
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.
