Question

Goods and services that are not sold in markets, such as food produced and consumed at home, are generally not included in GDP. True or False: As a result, you would expect that GDP per person in India and the United States will differ by less than their actual comparative economic well-being.
A. True
B. False

Answer 1

Answer: True.

Explanation:

Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced in an economy in a particular period of time. GDP measures the value of economic activity in a country.

Generally, the goods and services included in the calculation of a country's GDP are finished/final goods and services. Goods and services that are not sold in the market are not included in a country's GDP, this is because they are not final goods and therefore they are perceived as having no economic value.

In the scenario presented above, you would expect that India with a population of 1.3 billion will have a GDP that is almost the same as America, but this is not so because Indians produce a lot of goods and services that do not make it to the market because they are not final goods, and therefore have no economic value.

This means that, though Indians produce a lot, these products and services are not included in the calculation of their GDP, but America has more finished products which are included in the calculation of their GDP.