Question

Assertion (A): GDP is the correct measure of the improvement of welfare of the people.

Reason (R): Many activities in an economy are not evaluated in monetary terms, they are not included in GDP due to non-availability of data.

Options

• Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of the Assertion (A).

• Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of the Assertion (A).

• Assertion (A) is true, but Reason (R) is false. 

• Assertion (A) is false, but Reason (R) is true.

Answer 1

Assertion (A) is false, but Reason (R) is true.

Explanation:

There are certain drawbacks to using GDP as a measure of well-being:

1. GDP does not take into account changes in income distribution inequities.
2. Non-monetary exchange is not included in GDP.
3. GDP does not take into account changes in a country's population.
4. Externality valuation is not taken into consideration in GDP.