(i) Explain the likely impact of construction of 100 new super speciality hospitals in a nation on Gross Domestic Product (GDP) and welfare in the economy. (ii) Suppose, there are only three firms in a hypothetical economy, viz. A, B and C. During a given period of time, the following transactions were undertaken by them : (I) Firm A sold goods worth Rs. 2,000 to Firm B and Rs. 1,200 to Firm C. (II) Firm B sold goods worth Rs. 1,100 to Firm A and Rs. 3,500 to Firm C. (III) Firm C sold to households for final consumption, goods worth Rs. 5,700. Estimate the value of Gross Domestic Product at Factor Cost (GDP_FC), assuming the value of Net Indirect Taxes to be Rs. 240. (i) On the basis of the given data, estimate the value of Net Domestic Product at Factor Cost (NDP_FC) : (ii) "All consumption goods are durable in nature." Defend or refute the given statement with a valid argument.

Question

Accepted Answer

(i) Impact of 100 new super speciality hospitals:

On GDP:
- Construction phase increases GDCF (gross public investment)
- Operating phase increases GFCE (government spending on healthcare)
- Creates employment in construction and healthcare sectors
- Increases production of medical equipment and pharmaceuticals

On Welfare:
- Positive externality: Better healthcare reduces disease burden, increases productivity
- Improved access to healthcare for citizens
- May reduce out-of-pocket healthcare expenditure
- Long-term human capital improvement

GDP increases, but welfare improvement is greater due to positive externalities not captured in GDP.