Why may GDP rise when a family replaces home care of an elderly member with a paid care centre?
Answer and explanation
Correct answer: Because an unpaid service becomes a market service
The governing concept is the measurement boundary of GDP: recorded market production is counted, while many unpaid household services are not assigned a market value. Home care by family members may therefore be omitted, but a paid care centre records a service transaction and adds its value to measured output. Hence option C is correct; the other choices do not explain the accounting change.
Frequently asked questions
What is the correct answer to this question?
Because an unpaid service becomes a market service
Why is this the correct answer?
The governing concept is the measurement boundary of GDP: recorded market production is counted, while many unpaid household services are not assigned a market value. Home care by family members may therefore be omitted, but a paid care centre records a service transaction and adds its value to measured output. Hence option C is correct; the other choices do not explain the accounting change.
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.
