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Limitations of GDP as a Measure of Economic Welfare

Description: This quiz assesses your understanding of the limitations of GDP as a measure of economic welfare.
Number of Questions: 14
Created by:
Tags: economics economic welfare gdp
Attempted 0/14 Correct 0 Score 0

What does GDP stand for?

  1. Gross Domestic Product

  2. Gross Domestic Profit

  3. Gross Domestic Production

  4. Gross Domestic Performance


Correct Option: A
Explanation:

GDP stands for Gross Domestic Product, which is the total monetary value of all finished goods and services produced within a country's borders in a specific time period.

Which of the following is NOT a limitation of GDP as a measure of economic welfare?

  1. It does not include non-market activities.

  2. It does not account for income distribution.

  3. It is a comprehensive measure of economic activity.

  4. It is not adjusted for inflation.


Correct Option: C
Explanation:

GDP is a comprehensive measure of economic activity, meaning it includes all finished goods and services produced within a country's borders. The other options are limitations of GDP as a measure of economic welfare.

GDP does not include which of the following in its calculation?

  1. Government spending

  2. Household production

  3. Exports

  4. Investment


Correct Option: B
Explanation:

GDP does not include household production, which is the value of goods and services produced by households for their own use. This is because household production is not sold in the market and therefore does not generate income.

Which of the following is an example of a non-market activity that is not included in GDP?

  1. Volunteering

  2. Childcare

  3. Home improvement

  4. All of the above


Correct Option: D
Explanation:

All of the above are examples of non-market activities that are not included in GDP. This is because these activities are not sold in the market and therefore do not generate income.

GDP does not account for income distribution. What does this mean?

  1. GDP does not measure the gap between the rich and the poor.

  2. GDP does not measure the average income of a country.

  3. GDP does not measure the total income of a country.

  4. None of the above


Correct Option: A
Explanation:

GDP does not account for income distribution, meaning it does not measure the gap between the rich and the poor. This is because GDP is a measure of total output, not how that output is distributed among individuals.

Which of the following is an example of a negative externality that is not included in GDP?

  1. Pollution

  2. Traffic congestion

  3. Crime

  4. All of the above


Correct Option: D
Explanation:

All of the above are examples of negative externalities that are not included in GDP. This is because negative externalities are not sold in the market and therefore do not generate income.

GDP is not adjusted for inflation. What does this mean?

  1. GDP does not measure the real value of output.

  2. GDP does not measure the nominal value of output.

  3. GDP does not measure the total value of output.

  4. None of the above


Correct Option: A
Explanation:

GDP is not adjusted for inflation, meaning it does not measure the real value of output. This is because GDP is measured in nominal terms, which means it is not adjusted for changes in the price level.

Which of the following is an example of a positive externality that is not included in GDP?

  1. Education

  2. Healthcare

  3. Research and development

  4. All of the above


Correct Option: D
Explanation:

All of the above are examples of positive externalities that are not included in GDP. This is because positive externalities are not sold in the market and therefore do not generate income.

GDP does not include which of the following in its calculation?

  1. Government spending

  2. Household production

  3. Exports

  4. Investment


Correct Option: B
Explanation:

GDP does not include household production, which is the value of goods and services produced by households for their own use. This is because household production is not sold in the market and therefore does not generate income.

Which of the following is an example of a non-market activity that is not included in GDP?

  1. Volunteering

  2. Childcare

  3. Home improvement

  4. All of the above


Correct Option: D
Explanation:

All of the above are examples of non-market activities that are not included in GDP. This is because these activities are not sold in the market and therefore do not generate income.

GDP does not account for income distribution. What does this mean?

  1. GDP does not measure the gap between the rich and the poor.

  2. GDP does not measure the average income of a country.

  3. GDP does not measure the total income of a country.

  4. None of the above


Correct Option: A
Explanation:

GDP does not account for income distribution, meaning it does not measure the gap between the rich and the poor. This is because GDP is a measure of total output, not how that output is distributed among individuals.

Which of the following is an example of a negative externality that is not included in GDP?

  1. Pollution

  2. Traffic congestion

  3. Crime

  4. All of the above


Correct Option: D
Explanation:

All of the above are examples of negative externalities that are not included in GDP. This is because negative externalities are not sold in the market and therefore do not generate income.

GDP is not adjusted for inflation. What does this mean?

  1. GDP does not measure the real value of output.

  2. GDP does not measure the nominal value of output.

  3. GDP does not measure the total value of output.

  4. None of the above


Correct Option: A
Explanation:

GDP is not adjusted for inflation, meaning it does not measure the real value of output. This is because GDP is measured in nominal terms, which means it is not adjusted for changes in the price level.

Which of the following is an example of a positive externality that is not included in GDP?

  1. Education

  2. Healthcare

  3. Research and development

  4. All of the above


Correct Option: D
Explanation:

All of the above are examples of positive externalities that are not included in GDP. This is because positive externalities are not sold in the market and therefore do not generate income.

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