Question

GDP is not an appropriate indicator of welfare because of:

Options

• Externalities.

• Composition of GDP and distribution of GDP

• Non-monetary transactions

• All of the above

Answer 1

All of the above

Explanation:

There are certain limitations to GDP as a measure of well-being:

1. The Gross Domestic Product (GDP) does not account for changes in income inequality.
2. Non-monetary exchanges are excluded from GDP.
3. The change in a country's population is not taken into account in GDP. The value of externalities is not accounted for in GDP.