Question : Which of the following is a limitation of using GDP as a measure of economic welfare?
Option 1: It only measures the value of goods and services produced domestically
Option 2: It does not take into account the value of non-market activities
Option 3: It does not account for income inequality
Option 4: All of the above
Correct Answer: All of the above
Solution : The correct answer is (d) All of the above
All of the options mentioned are limitations of using GDP as a measure of economic welfare
a) GDP only measures the value of goods and services produced domestically and does not capture economic activities that occur outside the country.
b) GDP does not take into account the value of non-market activities such as household work, volunteer work, and informal economic activities, which can be significant contributors to well-being.
c) GDP does not directly account for income inequality. It focuses on the overall size of the economy rather than how the income is distributed among individuals or households.
Therefore, the correct answer is (d) All of the above.
