Why is market value used in GDP?
Answer and explanation
Correct answer: To add different goods and services in one common monetary measure
GDP combines the output of many different goods and services, such as food, clothing, transport and medical care. These items cannot be added in their physical units because kilograms, metres and services are not directly comparable. Market prices provide a common monetary unit for valuing and adding them. GDP nevertheless counts eligible final production, not population, transfer payments, or imports simply because they exist.
Frequently asked questions
What is the correct answer to this question?
To add different goods and services in one common monetary measure
Why is this the correct answer?
GDP combines the output of many different goods and services, such as food, clothing, transport and medical care. These items cannot be added in their physical units because kilograms, metres and services are not directly comparable. Market prices provide a common monetary unit for valuing and adding them. GDP nevertheless counts eligible final production, not population, transfer payments, or imports simply because they exist.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates.
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