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A country's real GDP rises while natural forest cover declines rapidly. What is the main limitation of the conventional measure?

Answer and explanation

Correct answer: It does not fully reflect the loss of ecological wealth

GDP measures current production flows at market prices, but it is not a complete balance sheet of natural wealth. Forest clearing may generate recorded timber or construction output and raise real GDP, while biodiversity, carbon storage, soil protection, and future ecosystem services are depleted or lost. Therefore option D identifies the limitation. A, B, and C make absolute or irrelevant claims about GDP rather than its treatment of natural capital.

Related tags

GdpWelfareDeforestationNatural-CapitalEnvironmentGdp And WelfareNational Income And Related AggregatesEconomics

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