Regarding GDP, consider the following statements:
1. GDP does not include externalities such as pollution.
2. It is both a qualitative and a quantitative concept.
3. Salaries earned by foreign employees in Mumbai are included in India’s GDP.
4. Salaries earned by Indian employees in London are also included in India’s GDP.
Which of the above statement are correct?
(a) 2, 3 and 4 only
(b) 2 and 4 only
(c) 1 and 3 only
(d) 1, 2, 3 and 4
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Option C
More Information
■ GDP :-
- GDP is the monetary value of all final goods and services produced within the boundary of a nation during a year period.
- Merits and Demerits of GDP as a measure of Growth
☆ Merits :-
- It is the most frequently used method of National Accounting.
- Per annum percentage change in it is the ‘growth rate’ of an economy.
- It is a ‘quantitative concept’ and its volume/size indicates the ‘internal’ strength of the economy.
- It is used by the IMF/WB in the comparative analyses of its member nations
☆ Demerits :-
- It is not a qualitative concept. It talks only about Growth but not Development.
- GDP does not include several factors that influence the standard of living such as Externalities (for example- pollution); Non-market transactions (such as household production, bartering of goods and services, and volunteer or unpaid services); Non-monetary economy (for example-Bartering), domestic works, Child rearing); Technological improvements; Sustainability of growth; wealth distribution, etc.
- To overcome, many steps/methods were taken up such as capability approach by Amartya Sen, HDI by Mahbub ul Haq, and Gross National Happiness (GNH) by Bhutan, etc.
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