What is are the major criticisms of the Gross Domestic Product GDP metric used to measure the s...........

Economic Affairs Growth and Indicators

Download Solution PDF

What is/are the major criticisms of the Gross Domestic Product (GDP) metric used to measure the status of an economy?

1. It cannot be used to measure consumer welfare.

2. It suffers with the problem of double counting environmental degradation and then environmental restoration.

3. It includes the value of natural resources of the economy in the estimation.

Select the correct answer using the codes below.

1 and 2 only

2 only

3 only

1, 2 and 3

छोटे Courses बड़े Results

Master Growth and Indicators

Prepare through Micro-courses

Try Now

Explanation:

Statement 1: It is used to measure consumer welfare, but it is not a good indicator of general economic welfare. For e.g. in economic theory, consumer welfare usually increases with increased production and a reduction in the amount if price that a consumer has to pay.

Statement 2: Critics suggest that GDP often includes the environment on the wrong side of the balance sheet because if someone first pollutes and then another person cleans the pollution, both activities add to GDP making environmental degradation frequently look good for the economy.

Critics of mainstream economics complain that GDP compiles spending that makes us worse off, spending that allows us to stay in the same place, and spending that makes us better off all in a single measure, giving a nation no clue if they are making progress or not.

Statement 3: GDP includes the value of only produced goods and services, not the natural resources as such.