Macroeconomics: National Income Accounting · Class 12 · CBSE · Commerce Economics
Why is GDP not considered a complete measure of the economic welfare of a country?
Practice question from Macroeconomics: National Income Accounting (Class 12 · CBSE · Commerce Economics), with the correct answer and a step-by-step solution.
medium · Subjective · Q-5789D3
Why is GDP not considered a complete measure of the economic welfare of a country?
Answer: GDP measures the value of marketed goods and services but does not fully reflect income distribution, non-market activities, externalities such as pollution, or the quality of life. Therefore, a rise in GDP may occur without a proportionate improvement in the welfare of all people.
Solution
GDP is an important measure of production, but it has limitations as a welfare indicator. It may ignore unpaid household work, unequal distribution of income, environmental damage, and the composition of output.
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