Question

GDP and Welfare
GDP is the sum total of the value of goods and services created within the geographical boundary of a country in a particular year. In order to compare the GDP figures and other macroeconomic variables of different countries or to compare the GDP figures of the same country at different points of time, we take the help of real GDP instead of relying on current market prices. The ratio of nominal GDP to real GDP gives us an idea of how prices have moved from the base year to the current year. The Consumer Price Index (CPI) and Wholesale Price Index (WPI) are the other important ways to measure change of prices in an economy.

GDP gets distributed among the people as incomes and may treat higher level of GDP of a country as an index of greater well-being of the people of that country. But it may be incorrect to treat GDP as an index of the welfare of the country based on three reasons. Firstly, the distribution of GDP is not uniform, secondly, non-monetary exchanges are not accounted as part of economic activity and lastly, GDP does not take into account externalities.

The unregistered activity i.e., the domestic services women perform at home is example of which of the following?

• A. GDP
• B. Positive Externalities.
• C. Negative Externalities.
• D. Non-monetary Exchanges.

Hint:

Unpaid housework has no money exchange, so GDP leaves it out: a non-monetary exchange.

Answer 1

The Correct Option is D

Step 1: Ask whether money changes hands
When a woman cooks and cleans for her own family, nobody pays her and nothing is sold. So this activity has no money flow.

Step 2: Link to the passage
The passage says that non-monetary exchanges are not accounted as part of economic activity. So work with no money flow belongs to this group.

Step 3: Test externalities
An externality is a side effect on someone outside the activity. Here the family members are the direct users of the service, not outsiders. So both externality options are out.

Step 4: Test GDP
GDP is a total measure, not a type of activity. Also, since this work is unpaid it is not counted in GDP. So option 1 does not describe it.

Step 5: Conclude
Only option 4 fits the idea of unpaid, unrecorded work.

Step 6: Why this matters for welfare
Because housework is not counted, GDP understates the real work done in an economy. The passage uses this as one of its three reasons why GDP alone is not a full index of welfare. This confirms that the right label for such work is non-monetary exchanges.

Final Answer:
Housework is an unrecorded, unpaid activity, so it is a non-monetary exchange. Option 4 is correct. \[ \boxed{\text{Option 4}} \]