Which of the following is NOT counted in the GDP of a country?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Domestic services that women perform at home without pay
GDP counts only activities valued in money. Work done at home without pay is not evaluated in money, so it is left out.
Option (1) Wages paid by a firm to its workers — True. Wages are a factor payment, summed in the income method.
Option (2) Domestic services that women perform at home without pay — False. Unpaid domestic services are not paid for, so they never enter GDP.
Option (3) Rise in the value of a firm’s inventories during the year — True. A rise in inventories is treated as investment.
Option (4) Purchase of a new machine by a firm — True. A new machine is a capital good; buying it is investment.
NCERT (2026-27): “2.5 GDP and Welfare … 2. Non-monetary exchanges: Many activities in an economy are not evaluated in monetary terms. For example, the domestic services women perform at home are not paid for. The exchanges which take place in the informal sector without the help of money are called barter exchanges. In barter exchanges, goods (or services) are directly exchanged against each other. But since money is not being used here, these exchanges are not registered as part of economic activity. In developing countries, where many remote regions are underdeveloped, these kinds of exchanges do take place, but they are generally not counted in the GDPs of these countries. This is a case of underestimation of GDP. …” “2.2.1 The Product or Value Added Method … Inventories are treated as capital. Addition to the stock of capital of a firm is known as investment. Therefore, change in the inventory of a firm is treated as investment. …” |