What are Non-Monetary Exchanges ? Give an example. Explain their impac

1.	What are Non-Monetary Exchanges ? Give an example. Explain their impact on use of Cross Domestic Product as an index of welfare of the people.
Answer» Non-Monetary Exchanges refer to the goods and services produced but not exchanged through money like the domestic services rendered by the members of a family to each other. The value of these services is many a time difficult to estimate and so it escapes national income estimation. These exchanges, however, have a positive effect on the welfare of the people. Detailed 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.

What are Non-Monetary Exchanges ? Give an example. Explain their impact on use of Cross Domestic Product as an index of welfare of the people.

Answer»

Non-Monetary Exchanges refer to the goods and services produced but not exchanged through money like the domestic services rendered by the members of a family to each other. The value of these services is many a time difficult to estimate and so it escapes national income estimation. These exchanges, however, have a positive effect on the welfare of the people.

Detailed 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.

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