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What problem can arise when environmental damage is ignored in GDP?

Answer and explanation

Correct answer: GDP growth may overstate the improvement in welfare

GDP records the value of measured production but generally does not subtract all environmental costs, such as pollution or depletion of natural resources. If output rises while environmental damage also increases, GDP may rise even as quality of life declines. Thus, GDP growth can overstate the improvement in welfare.

Related tags

EconomicsGdp LimitationsEnvironmental DamageWelfareGreen AccountingGdp And WelfareNational Income And Related AggregatesClass 11 Mcq

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