Excessive groundwater extraction raises current production but reduces future water availability. Which limitation of GDP does this illustrate?
Answer and explanation
Correct answer: It does not adequately reflect natural-resource depletion and sustainability
GDP records the value of current market production, but conventional GDP does not fully subtract the depletion of natural capital, such as groundwater, or the future cost of environmental damage. Therefore, production can rise while long-term welfare and sustainability decline. Option C is correct; the other options describe inflation, population measurement, or government services, none of which explains this resource-depletion problem.
Frequently asked questions
What is the correct answer to this question?
It does not adequately reflect natural-resource depletion and sustainability
Why is this the correct answer?
GDP records the value of current market production, but conventional GDP does not fully subtract the depletion of natural capital, such as groundwater, or the future cost of environmental damage. Therefore, production can rise while long-term welfare and sustainability decline. Option C is correct; the other options describe inflation, population measurement, or government services, none of which explains this resource-depletion problem.
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.
