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Why is the GDP deflator not a complete measure of economic welfare?

Answer and explanation

Correct answer: It measures price changes and does not show aspects such as income distribution

The GDP deflator is a broad price index for domestically produced final goods and services; it measures the relationship between nominal and real GDP. Economic welfare is wider than prices or output. It also depends on income distribution, leisure, environmental quality, health, safety, and the quality of public services. The deflator does not measure only population or imports and does not mechanically double output. Thus, option A is correct.

Related tags

Economic WelfareGdp DeflatorPrice IndexMeasurement LimitationsGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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