What are the limitations of GDP as a measure of economic well-being?

Choosing the option that states GDP does not reflect income inequality or environmental health accurately highlights significant limitations of GDP as an economic measure. While GDP provides an overall snapshot of a country's economic output, it falls short in assessing how that output is distributed among the population. A nation might have a high GDP, indicating robust economic activity, but that figure can mask substantial disparities in income among different demographic groups. Thus, GDP can indicate economic success without capturing whether the benefits of that success are shared equitably.

Furthermore, GDP does not account for environmental factors. Economic activities that contribute to GDP may lead to environmental degradation, resource depletion, or health issues, ultimately affecting long-term societal well-being. For instance, a country could see growth in GDP due to industrial activities that pollute the air and water, negatively impacting the health of its citizens and the quality of life.

This perspective helps to understand why GDP, despite being a crucial indicator of economic activity, cannot serve as a comprehensive measure of economic well-being on its own.