Question

GDP tends to _____.
Multiple Choice
overstate economic welfare, because it does not include certain nonmarket activities such as the productive work of housewives
understate economic welfare, because it includes expenditures undertaken to offset or correct pollution
understate economic welfare, because it does not take into account increases in leisure
overstate economic welfare, because it does not reflect improvements in product quality

Answer 1

Answer:

understate economic welfare, because it does not take into account increases in leisure

Explanation:

Although GDP is used as an indicator to assess a state or nation's standard of living, this indicator has a number of limitations. GDP does not take into account of leisure, levels of health and education, activities conducted outside the market, environmental quality etc. For example, country A might have a higher GDP than country B yet country A's workers work for more hours annually than country B.