Question

In which situation might GDP (gross domestic product) NOT be an accurate indicator of the health of a country's economy?
Responses

A The country is embarking on large public works projects.The country is embarking on large public works projects.

B The country has recently joined a new trade organization.The country has recently joined a new trade organization.

C The country relies on agriculture for most of its export revenues.The country relies on agriculture for most of its export revenues.

D The country has recently begun trading much more with a large trading partner.The country has recently begun trading much more with a large trading partner.

E The country has suffered a disaster and is receiving financial aid from overseas.The country has suffered a disaster and is receiving financial aid from overseas.

Answer 1

E. The country has suffered a disaster and is receiving financial aid from overseas.

In this situation, GDP may not accurately reflect the health of the economy because the increase in GDP due to foreign aid might not indicate genuine economic growth or improvement in the living standards of the citizens. Such aid can artificially inflate GDP figures while the underlying economic conditions may still be poor due to the disaster.