Welcome to the NCERT Solutions for Class 12 Macro Economics - Chapter National Income Accounting. This page offers a step-by-step solution to the specific question from Exercise 1, Question 12: . With detailed answers and explanations for each chapter, students can strengthen their understanding and prepare confidently for exams. Ideal for CBSE and other board students, this resource will simplify your study experience.
Write down some of the limitations of using GDP as an index of welfare of a country.
Limitations of using GDP as an indicator are as follows:
(i) Nonmonetary exchanges
GDP measures the goods and services produced in an economy during a particular period of time. However, it does not take into account those transactions that do not come under monetary terms. In less developed countries there are non-monetary exchanges, particularly in rural areas. Hence, these transactions remain outside the domain of GDP. The household sector and voluntary sectors get ignored in GDP.
(ii) Inflation
GDP does not take into account the level of prices in a country. Because of inflation, the cost of living increases leading to a decrease in the standard of living. The loss of welfare due to this decrease is not taken into consideration by GDP as an index of welfare.
(iii) Externalities
Increase in the national income is associated with increased levels of pollution, accidents, disasters, shortage and depletion of natural resources, etc. These factors affect human health and lead to ecological degradation. GDP fails to consider the costs or valuations of such factors.
(iv) Income pattern
GDP disregards the income distribution pattern. The increase in aggregate national income may be a result of the increase in income of a few individuals. Thus, this may lead to false interpretation of social welfare.
(v) Welfare
GDP ignores the welfare component as the goods and services produced may or may not add to the welfare of society. For example, the production of goods, like guns narcotic drugs, high-end luxurious goods increase the monetary value of production, but they do not add to the welfare of the majority of the population.
NCERT questions are designed to test your understanding of the concepts and theories discussed in the chapter. Here are some tips to help you answer NCERT questions effectively:
Stay updated with our latest educational content and study tips
Parent-Teacher Meetings (PTMs) are more than quick updates on marks — they’re a chance to build a real partnership between home and school. A good Parent-Teacher Meeting conversation helps parents see beyond grades. It opens up insights about a child’s strengths, struggles, emotions and even hidden talents. When parents participate actively, they don’t just track […]
Read MoreIn today’s world of endless information , knowing how to think is more important than knowing what to think . From school projects to real – life decisions , critical thinking helps students question ideas , analyze facts and form logical conclusions . But what exactly does critical thinking mean ? Simply put , it’s […]
Read MoreEvery student dreams of better grades , stronger focus and more study time – but the real challenge isn’t starting, it’s staying consistent . Building productive study habits is not about studying all day , it’s about studying smart . In today’s fast – paced digital world, distractions are everywhere – from endless phone notifications […]
Read MoreOnline gaming has rapidly become one of the most popular pastimes among children. Whether it’s multiplayer mobile games , PC adventures or console challenges , kids are spending more time than ever in the virtual world . On the surface, gaming seems entertaining and even educational – improving hand- eye coordination , teamwork and problem […]
Read MoreWelcome to the NCERT Solutions for Class 12 Macro Economics - Chapter . This page offers a step-by-step solution to the specific question from Excercise 1 , Question 12: Write down some of the limitations of using GDP as an index of welfare of a country.....
Comments
Thanks!