CSEET · Economic and Business Environment · National Income Accounting and Related Concepts
A homemaker in Pune cooks and cares for her family without payment. A restaurant in Pune sells similar meals for money. How does national income accounting treat these two activities?
Only the restaurant's meals are counted. National income accounting records market transactions with a monetary value, so unpaid household services by a homemaker are left out. This omission is a known limitation that understates the real volume of economic activity.
- ABoth are included in GDP since both produce meals
- BOnly the restaurant's meals are included, as the homemaker's services are not market transactionsCorrect
- COnly the homemaker's services are included, as they are essential
- DNeither is included, because food is a non-durable good
Explanation
National income accounting counts only goods and services that are exchanged in the market and valued in money. Unpaid household work has no market transaction, so it is omitted, which understates true output. Option about non-durables is wrong, since non-durable goods are included.
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