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Why is real GDP not a complete measure of economic welfare?

Answer and explanation

Correct answer: It does not fully reflect income distribution and non-market activities.

Real GDP is useful because it measures the value of domestic output at constant prices, thereby removing much of the effect of inflation. However, welfare also depends on how income is distributed, unpaid household work, leisure, environmental quality, health and safety. Real GDP does not fully capture these dimensions. Therefore option B is correct; A, C and D contradict the meaning or use of real GDP.

Related tags

Real GdpEconomic WelfareIncome DistributionNon-Market ActivitiesGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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