Answer:
A non-monetary exchange occurs when an entity receives goods or services from an external entity in exchange. This is because GDP does not take into account those transactions that cannot be expressed in the monetary terms. Often, in the less developed countries, there exists a large number of non-monetary exchanges, particularly in the rural areas and household sector. For example, farm labour paid in terms of food grains. Such transactions as cannot be expressed in the monetary terms remain uncaptured by GDP. Consequently, the value of GDP remains underestimated. In this sense, GDP cannot be considered as an index of economic welfare.
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