The nation of Atlantica, whose economy is based on fishing, reports a 10% increase in national income after its fleets begin harvesting a newly discovered, large stock of deep-water fish. In the same year, the nation of Veridia, whose economy is based on forestry, reports a similar 10% income growth after clearing a significant portion of its ancient, previously untouched forests for timber. An economist claims that the methods used to calculate the national income for both nations share the same fundamental flaw. What is this shared flaw?
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CORE Econ
Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
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Standard Gross Domestic Product (GDP) calculations accurately reflect a nation's sustainable economic well-being because they treat the depletion of natural capital (e.g., forests, fish stocks) the same way they treat the depreciation of man-made capital (e.g., machinery).
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Analyzing Competing Economic Reports
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The nation of Atlantica, whose economy is based on fishing, reports a 10% increase in national income after its fleets begin harvesting a newly discovered, large stock of deep-water fish. In the same year, the nation of Veridia, whose economy is based on forestry, reports a similar 10% income growth after clearing a significant portion of its ancient, previously untouched forests for timber. An economist claims that the methods used to calculate the national income for both nations share the same fundamental flaw. What is this shared flaw?