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If real GDP rises but the value of natural capital falls rapidly, which limitation of ordinary GDP becomes evident?

Answer and explanation

Correct answer: It does not fully adjust for depletion of natural wealth

Real GDP records the inflation-adjusted value of current final production, but ordinary GDP does not fully subtract the depletion of forests, minerals, soil, biodiversity, or other natural assets used in production. Consequently, measured growth may coexist with a decline in sustainable wealth. Option C identifies the limitation and points toward green or environmentally adjusted accounting; A, B, and D are incorrect descriptions.

Related tags

Gdp And WelfareNatural CapitalGreen AccountingSustainable DevelopmentNational Income And Related AggregatesEconomicsClass 11 Mcq

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