Practice question · Multiple choice
Two countries have identical GDP per capita, and one has far higher life expectancy and leisure. What does that reveal about the indicator?
Hints
- Ask what GDP adds when a forest is cut down, and what it subtracts.
- Name three things that make life better and never appear in the accounts.
Show the answer
C. GDP measures market production, not welfare
Why
GDP counts transactions, so it credits the cleanup of an oil spill and ignores the grandparent minding a child for free. It was designed as a production measure and Kuznets warned against reading it as welfare in the very report that introduced it, a caution ignored for eighty years.
Practise Macroeconomic Indicators
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