Question

In an economy, exclusion of _______ may lead to under estimation of the value of Gross Domestic Product (GDP). 
 

• A. Barter Transactions
• B. Services provided by family members
• C. Illegal activities
• D. Depreciation of Assets

Hint:

GDP does not account for non-market transactions such as barter, family services, or illegal activities, which may result in an underestimation of the total economic activity.

Answer 1

The Correct Option is D

Step 1: Understanding GDP and exclusions.
GDP is a measure of all economic activity in a country. Certain activities, such as barter transactions, family-provided services, and illegal activities, are not recorded in the official GDP calculations.
Step 2: Evaluation of the options.

• (A) Barter Transactions: Correct. Barter transactions are not accounted for in official GDP calculations because they do not involve monetary exchange.
• (B) Services provided by family members: Correct. Services provided by family members, such as childcare or housework, are not included in GDP as they are not market transactions.
• (C) Illegal activities: Correct. Illegal activities are also excluded from GDP calculations as they are not officially recorded in the economy.
• (D) Depreciation of Assets: Incorrect. Depreciation is a measure of the loss of value of capital goods over time but is not excluded from GDP. It is used to calculate Net Domestic Product (NDP).

Step 3: Conclusion.
Exclusion of barter transactions, family-provided services, and illegal activities leads to the underestimation of GDP. Final Answer:} (i), (ii), and (iii).