A) Subtract the monetary value of non-defensive public expenditures
B) Subtract the monetary value of personal consumption
C) Subtract the monetary value of capital formation
D) Subtract the costs of environmental degradation
Correct Answer: D
Solution :
An increase in GDP is conventionally used as a measure of how much better off we are getting. But it includes expenditures on things which are actually related to how much worse off we are getting (such as expenditures on goods to protect ourselves from assault with increasing crime levels e.g. guns), and does not include things such as the costs of the destruction of our natural environment, which everyone would value as part of their overall level of economic welfare. This is included in a measure such as ISEW. So increasing GDP can be consistent with declining ISEW.
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