Ignoring environmental damage in GDP creates which problem?
Answer and explanation
Correct answer: GDP may overstate actual economic welfare
GDP records the market value of production but does not fully subtract pollution, resource depletion, health damage, or loss of environmental quality. Consequently, production may rise while people's actual well-being declines. If environmental costs are ignored, GDP can overstate economic welfare. Measures such as green GDP attempt to adjust production for environmental degradation, so option A is correct.
Frequently asked questions
What is the correct answer to this question?
GDP may overstate actual economic welfare
Why is this the correct answer?
GDP records the market value of production but does not fully subtract pollution, resource depletion, health damage, or loss of environmental quality. Consequently, production may rise while people's actual well-being declines. If environmental costs are ignored, GDP can overstate economic welfare. Measures such as green GDP attempt to adjust production for environmental degradation, so option A is correct.
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.
