Explain how ‘Non-Monetary Exchanges’ impact the use of Gross Domestic Product as an index of economic welfare.

Explain how ‘Non-Monetary Exchanges’ impact the use of Gross Domestic Product as an index of economic welfare.

Answer. Non-monetary exchange transactions are not included in the estimation of Gross Domestic Product on account of practical difficulties like non-availability of reliable data. Although these activities enhance public welfare which may lead to underestimation of GDP. For example: kitchen gardening, services of homemaker etc.