Which of the following best captures the limitation of GDP as a measure of development?

• A. GDP excludes distribution and social outcomes
• B. GDP includes non-market activities
• C. GDP perfectly measures welfare
• D. GDP equals HDI

Answer: (A)

GDP measures the value of goods and services produced, but development is about how people actually live and whether wealth translates into well‑being for everyone. The key limitation is that GDP leaves out how income is distributed and the social outcomes that matter for development—things like health, education, poverty, and inequality. So, two countries could have similar GDP levels yet experience very different living standards and social progress, meaning GDP alone doesn’t capture development. That’s why this option is the best description of GDP’s limitation. The other statements aren’t correct: GDP doesn’t include non-market activities (it excludes them), it does not perfectly measure welfare, and it isn’t equal to the Human Development Index, which blends health, education, and income with other factors.