GDP tends to overstate economic well-being because it takes into account (Points : 4) improvements in product quality over time

Economics Jan 09, 2021

GDP tends to overstate economic well-being because it takes into account (Points : 4)       improvements in product quality over time.
      expenditures undertaken to correct pollution.
      illegal activities of individuals and businesses.
      nonmarket activities, such as the productive work of homemakers.

Expert Solution

Option B.

GDP tends to over state Economic well being because it takes into account the Expenditures undertaken to correct pollution.
Here Expenditures refers to social costs which are related to pollution and consumption of products with adverse health effects.
Because some of the production activities are under taken in an Economy, pollution is created, hence GDP tends to over state social welfare.
The harmful effects of pollution are not deducted from GDP .It includes the payments made for over coming pollution.

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