Rapid extraction of a mineral resource raises current GDP. What is the main concern for long-term welfare?
Answer and explanation
Correct answer: Conventional GDP does not fully deduct depletion of natural wealth
GDP records the market value of mineral extraction as current production, but conventional GDP does not fully subtract the loss of the natural asset being depleted. Extraction can therefore raise measured GDP while reducing future productive capacity and harming sustainability. A welfare assessment must consider resource depletion, environmental damage and future generations, so option C is the appropriate conclusion.
Frequently asked questions
What is the correct answer to this question?
Conventional GDP does not fully deduct depletion of natural wealth
Why is this the correct answer?
GDP records the market value of mineral extraction as current production, but conventional GDP does not fully subtract the loss of the natural asset being depleted. Extraction can therefore raise measured GDP while reducing future productive capacity and harming sustainability. A welfare assessment must consider resource depletion, environmental damage and future generations, so option C is the appropriate conclusion.
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.
