Why is GDP considered an incomplete indicator of economic welfare?
Answer and explanation
Correct answer: It does not fully show income distribution and non-market activities
GDP is a useful measure of the value of market production, but economic welfare depends on more than output. GDP does not adequately show how income is distributed, whether people enjoy leisure, or the value of unpaid household work. It may also ignore environmental damage and quality differences. Therefore, a rise in GDP does not automatically mean that every person's living standard or welfare has improved.
Frequently asked questions
What is the correct answer to this question?
It does not fully show income distribution and non-market activities
Why is this the correct answer?
GDP is a useful measure of the value of market production, but economic welfare depends on more than output. GDP does not adequately show how income is distributed, whether people enjoy leisure, or the value of unpaid household work. It may also ignore environmental damage and quality differences. Therefore, a rise in GDP does not automatically mean that every person's living standard or welfare has improved.
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.
