(i) "Many goods and services which may contribute to welfare, but are not included in estimating Gross Domestic Product (GDP)." Do you agree with the given statement ? Give valid reason in support of your answer. (ii) With suitable examples, distinguish between final goods and intermediate goods. (i) Using a suitable numerical example, distinguish between Real Gross Domestic Product (GDP) and Nominal Gross Domestic Product (GDP). (ii) State the meaning of 'normal resident' of a country.

Question

Accepted Answer

Yes, I agree. Many goods and services contribute to welfare but are excluded from GDP:

1. Non-market activities: Housewife services, kitchen gardening, self-help activities. These are not traded in markets.
2. Externalities: Environmental degradation (negative) and public goods like parks (positive) are not captured.
3. Distribution of income: GDP does not reflect how income is distributed. High GDP with high inequality may not improve welfare for all.
4. Population growth: If population grows faster than GDP, per capita availability falls.

These exclusions make GDP an imperfect measure of welfare. GDP measures production, not well-being. Green GNP and Human Development Index attempt to provide a more complete picture.