If natural forests are cut and timber is sold what problem arises in GDP measurement?
Answer and explanation
Correct answer: Timber value is added but the loss of forest wealth is not fully deducted
GDP records the current market value of timber sold because it is a measured economic transaction. However, conventional GDP does not fully subtract the depletion of natural capital, such as the lost forest stock and related ecological services. Therefore, GDP may rise even while sustainable wealth and long-term welfare fall. Option A is wrong because timber sales are included; B and C contradict the resource-loss effect.
Frequently asked questions
What is the correct answer to this question?
Timber value is added but the loss of forest wealth is not fully deducted
Why is this the correct answer?
GDP records the current market value of timber sold because it is a measured economic transaction. However, conventional GDP does not fully subtract the depletion of natural capital, such as the lost forest stock and related ecological services. Therefore, GDP may rise even while sustainable wealth and long-term welfare fall. Option A is wrong because timber sales are included; B and C contradict the resource-loss effect.
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.
