Which of the following is a shortcoming of GDP as a measure of economic well-being?

• A. GDP includes the value of household production.
• B. GDP does not account for income inequality within a country.
• C. GDP measures environmental sustainability.
• D. GDP reflects the quality of goods and services produced.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand what GDP measures. Gross Domestic Product (GDP) calculates the total market value of all final goods and services produced within a country during a specific period.
2. Step 2: Recognize the limitations of GDP. While GDP measures economic output, it does not capture factors such as income distribution, environmental quality, or non-market activities like household production.
3. Step 3: Analyze each option in the problem. For example, GDP does not include the value of household production, so the statement that it does is incorrect.
4. Step 4: Identify that GDP does not account for income inequality, meaning it treats all income as equal regardless of how it is distributed among the population.
5. Step 5: Conclude that GDP also does not measure environmental sustainability or the quality of goods and services, which are important for economic well-being but not reflected in GDP figures.