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Which limitation of ordinary GDP appears when natural forests are cut and timber is sold?

Answer and explanation

Correct answer: Timber value is added but loss of forest wealth is not fully deducted

When timber is sold, the value of the recorded market production is added to GDP. Ordinary GDP, however, generally does not deduct the full depletion of the forest as a natural asset or the lost ecological services, such as biodiversity and carbon absorption. Thus measured output may rise even while national wealth and environmental welfare decline. D correctly describes this limitation; A, B and C deny the relevant accounting issue.

Related tags

Forest DepletionNatural CapitalGdp LimitationGreen AccountingGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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