Question

What are non monetry exchanges? Give an example. Explain their impact on use of gross domestic product as an index of welfare of the people?

Answer 1

Answer:

A nonmonetary transaction occurs when a business or commerce activity concludes without the transfer of money between accounts for parties tied to the transaction. Nonmonetary transactions can be something as simple as a change of address or can refer to more complex transactions in the financial sector.

Answer 2

Answer:

These are the activities which are not measured in monetary term. Non-Monetary transactions are quite evident in rural areas where payments for farm labor are often made in kind rather than cash. Impact: As these activities are not included in GDP, so GDP remains underestimated. Thus, non-monetary exchanges make GDP an inappropriate index of welfare.