GDP is not a perfect measure of welfare because it
A)treats a dollar spent on guns the same as a dollar spent on education
B)treats a dollar spent on exports the same as a dollar spent on imports
C)double counts the value of leisure time
D)double counts depreciation
E)counts illegal activities in the underground economy

Question

Quizplus · Accepted Answer

GDP only measures the total value of goods and services produced in a country. It doesn't take into account how this production affects welfare. For instance, a country could be producing a lot of goods, but if those goods are harming the environment or causing inequality, then the welfare of the people might not necessarily be improving. Furthermore, GDP treats all spending equally, so a dollar spent on a destructive activity like building a bomb is treated the same as a dollar spent on education or healthcare.

GDP Is Not a Perfect Measure of Welfare Because It