Which of the following is not a problem in comparing developed and developing countries GNP ?
Correct answer: A. GNP is understated for developed countries, since a number of items included in their national incomes are intermediate goods
- A. GNP is understated for developed countries, since a number of items included in their national incomes are intermediate goods
- B. The economic contribution of a housewife is a peasant family may not be measured is GNP is poor country
- C. GNP in understated for developing countries since many of their labor intensive good have no impact on exchange rate since they are not traded
- D. GNP is overstated for for countries where the price of foreign exchange is less than market clearing price
Explanation
National income accounting is designed to exclude intermediate goods, so their inclusion does not understate developed countries' GNP. The other statements describe measurement or exchange-rate problems that can distort comparisons between developed and developing countries.
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