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.
Frequently asked questions
What is the correct answer to this question?
It does not fully reflect the loss of ecological wealth
Why is this the correct answer?
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.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates. Topic: GDP and Welfare.
