Question

which statement supports why gdp is a good indicator of economic growth?
a gdp excludes non - market transactions.
b gdp does not include the degree of income inequality in society.
c gdp treats replacement capital the same as the creation of new capital.
d gdp does not include negative externalities indicative of consumption and production costs.
e gdp quantifies the production of goods and services and accurately indicates the size of the economy.

Explanation:

To determine which statement supports why GDP is a good indicator of economic growth, we analyze each option:

• Option A: Excluding non - market transactions is a limitation, not a reason for being a good growth indicator.
• Option B: Not including income inequality is a limitation, not a positive for growth indication.
• Option C: Treating replacement capital like new capital is a limitation in measuring economic well - being, not a growth - supporting feature.
• Option D: Not including negative externalities or costs is a limitation.
• Option E: GDP's role is to quantify the production of goods and services, which directly relates to the size of the economy. Measuring production is fundamental for assessing economic growth as growth is often about the expansion of goods and services production.

Answer:

E. GDP quantifies the production of goods and services and accurately indicates the size of the economy.