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CSEET · Economic and Business Environment · National Income Accounting and Related Concepts

Which of the following is a limitation of GDP as a measure of economic well-being?

GDP does not deduct environmental damage such as pollution or depletion of natural resources, so it may overstate sustainable well-being. Being monetary, annual, and based on final goods are features of its method rather than shortcomings.

  1. AIt does not account for environmental degradation caused by productionCorrect
  2. BIt is expressed in monetary terms
  3. CIt is calculated annually
  4. DIt uses the value of final goods

Explanation

GDP adds output value but does not deduct the cost of pollution or resource depletion, so it can overstate sustainable well-being. The other options are features of the method, not limitations.

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