Why is it inappropriate to rely only on current GDP when natural resources are being depleted rapidly?
Answer and explanation
Correct answer: Because current production may damage future capacity
GDP is a flow measure of current production, whereas natural resources such as forests, soil, minerals, and groundwater are part of the productive asset base. Extracting them may raise present output while reducing the economy’s future capacity and imposing environmental costs. Sustainable welfare therefore requires considering resource stocks, depletion, regeneration, and long-term effects, not GDP alone. Option C expresses this intergenerational limitation.
Frequently asked questions
What is the correct answer to this question?
Because current production may damage future capacity
Why is this the correct answer?
GDP is a flow measure of current production, whereas natural resources such as forests, soil, minerals, and groundwater are part of the productive asset base. Extracting them may raise present output while reducing the economy’s future capacity and imposing environmental costs. Sustainable welfare therefore requires considering resource stocks, depletion, regeneration, and long-term effects, not GDP alone. Option C expresses this intergenerational limitation.
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.
