GDP is not a perfect measure of social welfare and the society's economic well-being because:?

Question

GDP is not a perfect measure of social welfare and the society's economic well-being because:


A. it does not say anything about the distribution of income.
B. GDP accounting rules do not adjust for production that causes negative spillovers.
C. it does not include all economic activities in the economy.
D. all of these

Answer 1

D All of these.

A. You could have 499 people who made no money and one who made 500 million and the GDP would say that the average income was $1,000,000 per person.

B. A negative spillover is something like manufacturing a product and having the mess caused by the release of pollutants and toxins costing more than the profit made on the product. Strip mining coal has a huge negative spillover.

C. Not every activity is measured. If a bunch of Habitat for Humanity Volunteers build a house and are not paid, the value of the house is not factored into the GDP, and yet it is a thing of value, worth perhaps up th $200,000 in some parts of the country.

Answer 2

GDP isn't a appropriate degree of economic wellbeing because of the fact it does not comprise nonmarket transactions that would no longer be measured monetarily, yet are important in degree wellbeing. those comprise entertainment time, better product high quality, and the underground marketplace (playing, prostitution, drug commerce). GDP measures economic wellbeing of a rustic by ability of which comprise the products and centers produced by ability of citizen-presented and distant places-presented supplies interior the country's geographical barriers. the wonderful degree of economic wellbeing is consistent with capita output (GDP/inhabitants).