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explain how non monetary exchange are a limitation of the GDP or an in...
Gross Domestic product (GDP) is the total value of all the final goods and services produced by an economy within the domestic territory of a country in a particular year. It is one of the best indicators of the economic performance of a country but not of economic welfare or economic development because while calculating GDP, the non-monetary transactions are ignored.

Non-monetary exchanges include activities like services of family members provided to each other etc. For example, service of a housewife while teaching her children or while cooking food in kitchen. These activities are not included in GDP but they contribute to welfare of the people.
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explain how non monetary exchange are a limitation of the GDP or an in...

Non-monetary exchanges as a limitation of GDP

- Non-monetary exchanges refer to transactions that do not involve the use of money, such as bartering or self-production.
- GDP only considers monetary transactions, so non-monetary exchanges are not included in the calculation.
- This leads to an underestimation of the actual economic activity in a country, as valuable goods and services exchanged through non-monetary means are not accounted for.

Non-monetary exchanges as an indicator of welfare

- Non-monetary exchanges can be a better indicator of welfare than GDP in certain cases.
- For example, if individuals exchange goods and services through bartering or self-production, they may be able to meet their needs without relying on money.
- This can indicate a higher level of self-sufficiency and community support, which are important factors for overall welfare.
- Including non-monetary exchanges in welfare assessments can provide a more holistic view of economic well-being and social cohesion in a society.

In conclusion, while non-monetary exchanges are a limitation of GDP as they are not included in the calculation, they can also be a valuable indicator of welfare by reflecting alternative forms of economic activity and community well-being.
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explain how non monetary exchange are a limitation of the GDP or an indicator of welfare Related: Short Answer Questions - Chapter 5 - National Income and Related Aggregates, Class 12, Economics?
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