Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It excludes household production that does not involve monetary transactions.
B
It measures only government spending and ignores private sector activity.
C
It accounts for all economic activities equally, including illegal markets.
D
It includes only exported goods and services.
Understanding the Answer
Let's break down why this is correct
Answer
A significant limitation of GDP, or Gross Domestic Product, is that it does not account for household production and unpaid work. For example, when a parent stays home to care for children or cook meals, their valuable contributions to the family and society are not included in GDP calculations. This means that GDP might show a growing economy even if many people are doing important work at home without pay. Additionally, GDP focuses only on market transactions, so it overlooks activities like volunteering or caregiving that enhance community well-being. Therefore, while GDP is a useful measure of economic activity, it does not fully capture the true welfare and quality of life of people in a society.
Detailed Explanation
GDP does not count work done at home, like cooking or cleaning. Other options are incorrect because Some might think GDP only looks at government spending; It's a common mistake to think GDP counts all activities, even illegal ones.
Key Concepts
GDP Limitations
Household Production
Economic Welfare
Topic
GDP Limitations and Household Production
Difficulty
easy level question
Cognitive Level
understand
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