What problem arises when leisure time is ignored while using NNP as an indicator of welfare?
Answer and explanation
Correct answer: Assessment of real quality of life may be incomplete
NNP measures the monetary value of final goods and services after allowing for depreciation, but it does not fully capture non-market dimensions of well-being. Leisure is valuable because it contributes to quality of life, even though it usually has no market price. If people work longer and lose leisure, NNP may rise without an equivalent improvement in welfare. Therefore, ignoring leisure makes the welfare assessment incomplete.
Frequently asked questions
What is the correct answer to this question?
Assessment of real quality of life may be incomplete
Why is this the correct answer?
NNP measures the monetary value of final goods and services after allowing for depreciation, but it does not fully capture non-market dimensions of well-being. Leisure is valuable because it contributes to quality of life, even though it usually has no market price. If people work longer and lose leisure, NNP may rise without an equivalent improvement in welfare. Therefore, ignoring leisure makes the welfare assessment incomplete.
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.
