📚 Learning Guide
GDP Limitations and Household Production
hard

Which of the following statements best explains a limitation of GDP when assessing the overall productivity of an economy, particularly regarding household production?

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Choose the Best Answer

A

GDP includes all forms of non-market activities, effectively capturing household production.

B

GDP provides a complete picture of economic wellbeing by measuring both market and non-market activities.

C

GDP does not account for non-market activities such as household labor, which can lead to an underestimation of true productivity.

D

GDP is solely focused on market transactions and completely ignores productivity measurements.

Understanding the Answer

Let's break down why this is correct

Answer

Gross Domestic Product, or GDP, measures the total value of goods and services produced in a country, but it has limitations when assessing the overall productivity of an economy. One major limitation is that GDP does not account for household production, which includes valuable activities like cooking, cleaning, and childcare that families do at home. For example, if a parent stays home to take care of children instead of working for pay, their important contributions to the household are not reflected in GDP numbers. This means that GDP may underestimate the true productivity of an economy because it ignores the work done in households that supports society. Therefore, while GDP provides useful economic data, it does not capture the full picture of all productive activities occurring in a country.

Detailed Explanation

GDP does not include unpaid work at home, like cooking or cleaning. Other options are incorrect because Some might think GDP counts all activities, but it only tracks paid work; This answer suggests GDP shows everything, but it misses unpaid activities.

Key Concepts

limitations of GDP
non-market activities
productivity measurement
Topic

GDP Limitations and Household Production

Difficulty

hard level question

Cognitive Level

understand

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