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Question

Regarding GDP, consider the following statements:

1. Salaries earned by foreign employees in Mumbai are included in India’s GDP. 

2. Salaries earned by Indian employees in British High Commission to India are included in India’s GNP but not in GDP. 

3. GDP is both a qualitative and a quantitative concept.

Which of the above statement is/are correct?

A 1 only Correct Answer Incorrect Answer
B 1 and 2 only Correct Answer Incorrect Answer
C 2 and 3 only Correct Answer Incorrect Answer
D 2 only Correct Answer Incorrect Answer
E None of the above Correct Answer Incorrect Answer

Solution

GDP is the monetary value of all final goods and services produced within the boundary of a nation during a year period, irrespective of the nationality of the employees. Salaries earned by Indian employees in British High Commission to India will be included in British GDP, as the foreign missions to India are not under the political control of Indian Government but under the control of respective nation. It is merely a ‘quantitative’ concept, which cannot provide a qualitative measure or growth of the nation. GDP does not include several factors that influence the standard of living such as Externalities.

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