Question

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

Answer 1

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 times difficult to estimate and so it escapes national income estimation. These exchanges however have positive effect on the welfare of the people.

Example: Housewife rendering service at home to the family members.