Which statement best describes a limitation of GDP as a measure of development?

Which statement best describes a limitation of GDP as a measure of development?

• A. GDP omits non-market activities, income distribution, health, education, environmental costs, and quality of life.
• B. GDP fully accounts for informal economic activity.
• C. GDP measures overall well-being more comprehensively than HDI.
• D. GDP provides a complete picture of sustainable development.

Answer: (B)

GDP is a narrow yardstick that sums up the market value of goods and services produced, but it misses many important pieces of development. It doesn’t count non-market activities like unpaid domestic work or volunteer efforts, and it doesn’t reveal how evenly income is distributed—so a high GDP can hide wide disparities in living standards. It also fails to directly measure health, education, or quality of life, and it doesn’t subtract environmental costs or resource depletion. Because of these gaps, GDP isn’t a complete measure of development or well-being, and it can overlook whether growth is sustainable over time. That’s why the statement describing GDP as omitting non-market activities, income distribution, health, education, environmental costs, and quality of life best captures its limitation. The idea that GDP fully accounts for informal activity, or that it provides a more comprehensive view of well-being or sustainability than broader measures, isn’t accurate.

GDP is a narrow yardstick that sums up the market value of goods and services produced, but it misses many important pieces of development. It doesn’t count non-market activities like unpaid domestic work or volunteer efforts, and it doesn’t reveal how evenly income is distributed—so a high GDP can hide wide disparities in living standards. It also fails to directly measure health, education, or quality of life, and it doesn’t subtract environmental costs or resource depletion. Because of these gaps, GDP isn’t a complete measure of development or well-being, and it can overlook whether growth is sustainable over time. That’s why the statement describing GDP as omitting non-market activities, income distribution, health, education, environmental costs, and quality of life best captures its limitation. The idea that GDP fully accounts for informal activity, or that it provides a more comprehensive view of well-being or sustainability than broader measures, isn’t accurate.