As a national economy moves from low income to higher income levels, how does the share of the tertiary or service sector in gross domestic product (GDP) generally change?

Introduction / Context:
This question tests understanding of the structural transformation of economies as they develop. Economists classify economic activity into primary, secondary and tertiary sectors, and track how their shares in gross domestic product change over time. Knowing the typical pattern for the service or tertiary sector is important for analysing both Indian and global growth experiences.

Given Data / Assumptions:

• The economy starts from a relatively low income level and progresses to a higher income level.
• GDP is broken into primary, secondary and tertiary sectors.
• The question focuses only on the share of the tertiary or service sector.
• We assume a long run trend rather than short term fluctuations.

Concept / Approach:
Development economics explains that as economies grow, labour and output shift from agriculture to industry and later to services. In the early stages, the primary sector dominates. With industrialisation, the secondary sector gains importance. In advanced stages, high value services like finance, information technology, transport, education and health become increasingly important, leading to a rising share of the tertiary sector in GDP. The correct answer must reflect this long term upward trend.

Step-by-Step Solution:
Step 1: Recall the three sector classification of economic activities.Step 2: Note that in low income economies, agriculture and allied activities contribute a large share to GDP.Step 3: With industrialisation, manufacturing and construction expand, raising the secondary sector share.Step 4: As income and education levels rise further, demand for services such as banking, tourism, communication and health grows, which increases the tertiary sector share.Step 5: Conclude that the share of the tertiary sector in GDP generally increases with economic development.

Verification / Alternative check:
Cross country data for advanced economies like the United States, Japan and many European countries show that services dominate their GDP. Similarly, in India the share of services in GDP has steadily risen over the decades while the share of agriculture has fallen. These empirical patterns confirm that development is associated with a rising contribution of the tertiary sector to GDP.

Why Other Options Are Wrong:
The idea that the share decreases is inconsistent with both theory and evidence, since services expand with income.
The suggestion that it decreases first and then increases does not match the usual pattern; instead, it remains low initially and then rises as income grows.
Remaining constant would imply no structural change, which contradicts observed development trends.
A sharp fall at higher income levels is also unrealistic, because high income economies are usually service dominated.

Common Pitfalls:
Some candidates confuse the behaviour of the secondary sector with that of the tertiary sector. The secondary sector may rise and then stabilise or decline in relative terms, whereas the tertiary sector usually shows a more sustained increase. Another mistake is to focus only on employment shares rather than value added shares, which can differ. Understanding that services include many high value modern activities helps to avoid these errors.

Final Answer:
As an economy develops, the share of the tertiary sector in GDP generally increases.