The growth of GDP may understate changes in the economy's economic well-being over time if the:

• A. nominal GDP increases solely due to inflation
• B. population decreases while GDP remains constant
• C. real GDP falls but nominal GDP rises
• D. quality of goods and services improves but is not fully captured in GDP statistics

Answer: (D)

Verified step by step guidance

1. Understand that GDP measures the total market value of all final goods and services produced within a country in a given period, but it may not fully capture changes in economic well-being.
2. Recognize that nominal GDP can increase due to inflation, which does not reflect a real increase in economic output or well-being; hence, real GDP is used to adjust for price changes.
3. Consider that changes in population affect per capita GDP, which is a better indicator of individual economic well-being than total GDP alone.
4. Note that if the quality of goods and services improves over time but these improvements are not fully accounted for in GDP calculations, the growth in GDP may understate the true increase in economic well-being.
5. Conclude that the key limitation here is that GDP statistics may not fully capture improvements in quality, which means economic well-being could be rising more than GDP growth suggests.