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Explain how ‘Non-Monetary Exchanges’ impact the use of Gross Domestic Product as an index of economic welfare.
(3 Marks)
Answer
Non-Monetary Exchanges refer to those activities which cannot be evaluated in monetary terms, hence are not included in the valuation of GDP.
However, these activities still influence the economic welfare.
So, there exclusion can lead to underestimation of Gross Domestic Product.
For example: Kitchen gardening, Services of homemaker etc.
