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GDP does not fully reflect the damage caused by over-exploitation of natural resources. Which limitation of GDP does this illustrate?

Answer and explanation

Correct answer: GDP does not fully measure environmental costs

GDP measures the market value of final goods and services produced, but it does not adequately value the depletion of forests, minerals, clean air, water, or other natural capital. Pollution and ecological damage may therefore reduce real welfare without reducing measured GDP. Hence, this is a limitation related to environmental costs and sustainable welfare.

Related tags

GdpEnvironmental CostsGdp LimitationsWelfareNatural ResourcesGdp And WelfareNational Income And Related AggregatesEconomics

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