Which limitation of GDP is shown when production that pollutes a river increases?
Answer and explanation
Correct answer: It does not fully reflect environmental damage
GDP measures the value of market production, but it does not automatically subtract every social and environmental cost created by that production. If a factory increases output while polluting a river, the sale of its products can raise GDP, whereas damage to health, ecosystems, and water quality may be omitted or inadequately valued. Thus option D identifies the relevant limitation; the other choices do not describe this case.
Frequently asked questions
What is the correct answer to this question?
It does not fully reflect environmental damage
Why is this the correct answer?
GDP measures the value of market production, but it does not automatically subtract every social and environmental cost created by that production. If a factory increases output while polluting a river, the sale of its products can raise GDP, whereas damage to health, ecosystems, and water quality may be omitted or inadequately valued. Thus option D identifies the relevant limitation; the other choices do not describe this case.
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.
