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What is a major difficulty in using GDP as a complete measure of welfare?

Answer and explanation

Correct answer: Many social and non-monetary benefits and costs are not reflected in market prices

The governing concept is the distinction between economic production and comprehensive welfare. GDP adds the market value of final goods and services produced, but many important effects—such as unpaid household work, leisure, pollution, inequality, safety and consumer surplus—are not fully recorded at market prices. Therefore GDP is useful for tracking production but cannot alone measure welfare. Option A states this limitation; B, C and D are factually incorrect.

Related tags

Gdp LimitationNon Monetary WelfareSocial CostsGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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