Question

3. Which of the following is a limitation of using gross domestic product (GDP) to measure economic development?

A. It overemphasizes population
B. It overlooks economic growth
C. It exaggerates the role of health
D. It ignores the distribution of wealth

Answer 1

GDP is limited as a measure of economic development because it ignores the distribution of wealth and does not account for non-economic factors that contribute to quality of life such as environmental quality, health, and leisure.

Step-by-step explanation:

One limitation of using gross domestic product (GDP) to measure economic development is that it ignores the distribution of wealth within a society. While GDP calculates the total value of goods and services produced within a country, it does not reflect how those goods and services are distributed among the population. This means that even if a country has a high GDP, it could still have significant levels of poverty and income inequality. Therefore, GDP is not a complete measure of a country's development or the well-being of its inhabitants.

Moreover, GDP does not account for non-economic factors that contribute to the quality of life, such as environmental quality, health and education services and levels of leisure and happiness. Other factors utilized to measure development include a nation's level of energy consumption, availability of consumer goods, and social indicators which provide a more comprehensive understanding of a country's development.

Answer 2

GDP is a limitation when it comes to measuring economic development as it fails to account for the distribution of wealth within a country. It also overlooks non-market activities, changes in environmental quality, health, and education levels that can influence a society's standard of living. Therefore the correct answer is D. It ignores the distribution of wealth

Step-by-step explanation:

One limitation of using gross domestic product (GDP) to measure economic development is that it ignores the distribution of wealth within a country. GDP calculates the total monetary amount of goods and services produced within a country for a given year, but it does not account for how that wealth is spread among the population. Therefore, even if the GDP is high, it may not reflect the well-being of all citizens if the wealth is concentrated in the hands of a few.

GDP also does not take into consideration other factors that can affect quality of life, such as leisure, environmental quality, health, education, and non-market activities. The increase in the variety of goods and improvements in technology are also aspects of economic development that GDP does not directly capture. Hence, whilst GDP is a useful measure of economic activity, it is a rough indicator of society's standard of living and should be used alongside other indicators to gauge a country's development.