Environmental quality may decline even when real GDP rises. What does this show?
Answer and explanation
Correct answer: Real GDP is not a complete measure of welfare
Real GDP measures the market value of final goods and services produced, adjusted for price changes. It does not fully include pollution, resource depletion, leisure, inequality or other non-market aspects of well-being. Thus, production can rise while environmental costs increase. Option A is correct; this limitation does not make real GDP useless or always incorrect.
Frequently asked questions
What is the correct answer to this question?
Real GDP is not a complete measure of welfare
Why is this the correct answer?
Real GDP measures the market value of final goods and services produced, adjusted for price changes. It does not fully include pollution, resource depletion, leisure, inequality or other non-market aspects of well-being. Thus, production can rise while environmental costs increase. Option A is correct; this limitation does not make real GDP useless or always incorrect.
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.
