An economy overuses groundwater to increase production. Which limitation of GDP is shown here?
Answer and explanation
Correct answer: It does not fully deduct depletion of natural resources
The governing concept is that GDP measures current market production but is not a complete measure of sustainable welfare. Over-pumping groundwater can raise present output, yet it reduces the future stock and availability of a valuable natural resource. Conventional GDP does not fully subtract this depletion or the resulting environmental cost. Thus C is correct; GDP does include final goods and many government services, while population is a separate measure rather than this specific limitation.
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What is the correct answer to this question?
It does not fully deduct depletion of natural resources
Why is this the correct answer?
The governing concept is that GDP measures current market production but is not a complete measure of sustainable welfare. Over-pumping groundwater can raise present output, yet it reduces the future stock and availability of a valuable natural resource. Conventional GDP does not fully subtract this depletion or the resulting environmental cost. Thus C is correct; GDP does include final goods and many government services, while population is a separate measure rather than this specific limitation.
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.
