If a country's real GDP rises but most of the growth comes from natural-resource depletion and longer working hours, what is the best welfare assessment?
Answer and explanation
Correct answer: Real GDP alone is insufficient because sustainability and leisure also matter
The governing concept is the limitation of GDP as a welfare measure. Real GDP records inflation-adjusted market production, but it does not by itself deduct resource depletion, environmental costs, or the loss of leisure from longer working hours. Therefore, option C is correct: welfare cannot be judged from output alone. Options A and B are too certain, while D ignores important non-market effects.
Frequently asked questions
What is the correct answer to this question?
Real GDP alone is insufficient because sustainability and leisure also matter
Why is this the correct answer?
The governing concept is the limitation of GDP as a welfare measure. Real GDP records inflation-adjusted market production, but it does not by itself deduct resource depletion, environmental costs, or the loss of leisure from longer working hours. Therefore, option C is correct: welfare cannot be judged from output alone. Options A and B are too certain, while D ignores important non-market effects.
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.
