Which limitation of GDP makes it an incomplete measure of economic welfare?
Correct answer: B. It ignores the distribution of income among households
- A. It excludes the value of all manufactured goods
- B. It ignores the distribution of income among households
- C. It counts exports as reductions in national output
- D. It includes only goods sold in international markets
Explanation
GDP measures the value of production, but it does not show how income is distributed among people. A country may have rising GDP while inequality, poverty or economic insecurity also increases.
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About Macroeconomics
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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