Question

which of the following describes a limitation of gross domestic product (gdp)? a it overstates the value of output by counting non - market transactions such as mowing your neighbors lawn. b it understates the value of output by accounting for negative environmental side effects of production. c it does not account for the distribution of income in a nation or income inequality. d it overstates economic well - being by including all do - it - yourself activities. e it overstates the value of output by making adjustments for the value of services consumed for free such as browsing on the web.

Explanation:

GDP measures the market - value of all final goods and services produced within a country in a given period. It does not account for income distribution. Non - market transactions like mowing a neighbor's lawn are not counted in GDP, so option A is incorrect. GDP does not account for negative environmental side - effects, not understate output because of them (option B is wrong). Do - it - yourself activities are not included in GDP, so it doesn't overstate economic well - being by including them (option D is wrong). Adjustments for free services like web browsing are not made in GDP calculation, so option E is wrong.

Answer:

C. It does not account for the distribution of income in a nation or income inequality