Why is real GDP not considered a complete measure of economic welfare?
Answer and explanation
Correct answer: It does not fully reflect income distribution and non-market activities
Real GDP is designed to measure the quantity of final goods and services produced, with the effect of price changes removed. Economic welfare is broader than production: it also depends on how income is distributed, unpaid household work, leisure, environmental quality, health and security. Thus option B is correct. Option C is false because constant prices are used, while D is false because final goods are included.
Frequently asked questions
What is the correct answer to this question?
It does not fully reflect income distribution and non-market activities
Why is this the correct answer?
Real GDP is designed to measure the quantity of final goods and services produced, with the effect of price changes removed. Economic welfare is broader than production: it also depends on how income is distributed, unpaid household work, leisure, environmental quality, health and security. Thus option B is correct. Option C is false because constant prices are used, while D is false because final goods are included.
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.
