X pays Rs. 5 lakhs to a person to transport fake currency worth Rs. 50 lakhs. The Police department pays Rs. 5 lakhs to a detective to investigate the crime. The detective’s income is taxed at 10%. If the above transactions happen in the same year and within the boundary of a country, the contribution of these transactions to GDP (in Rs. lakhs) is
Show Hint
- 5.5
- 5
- 10
- 4.5
The Correct Option is B
Solution and Explanation
The transport of fake currency is illegal — hence not included in GDP. The detective’s investigation service for the police department is a **legal paid service** and forms part of GDP.
Step 2: Compute value added.
The detective is paid Rs. 5 lakhs. Income tax (10%) = Rs. 0.5 lakh, but taxes do not reduce the value of production; GDP measures **gross** production before tax. \[ \text{Contribution to GDP} = 5 \text{ lakhs}. \]
Step 3: Conclusion.
Hence, the total contribution of these activities to GDP is Rs. 5 lakhs.
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