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An economy overuses groundwater to increase production. Which limitation of GDP is shown here?

Answer and explanation

Correct answer: It does not fully deduct depletion of natural resources

The governing concept is that GDP measures current market production but is not a complete measure of sustainable welfare. Over-pumping groundwater can raise present output, yet it reduces the future stock and availability of a valuable natural resource. Conventional GDP does not fully subtract this depletion or the resulting environmental cost. Thus C is correct; GDP does include final goods and many government services, while population is a separate measure rather than this specific limitation.

Related tags

Groundwater DepletionNatural ResourcesGdp LimitationWelfareGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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