Questions: Multiple Choice Question By ignoring the value of leisure time, how does national income accounting affect our well-being? It overstates our well-being: It accurately states our well-being. It understates our well-being. It has no effect on well-being.

The answer is: It understates our well-being.

Explanation for each option:

1. It overstates our well-being:

   • This option is incorrect. Ignoring the value of leisure time does not lead to an overstatement of well-being. In fact, it fails to account for the positive effects of leisure on quality of life, which means the overall well-being is not fully captured.

2. It accurately states our well-being:

   • This option is incorrect. National income accounting, such as GDP, does not accurately reflect well-being when it ignores leisure time. Well-being encompasses more than just economic output; it also includes non-economic factors like leisure, which contribute to life satisfaction and happiness.

3. It understates our well-being:

   • This option is correct. By ignoring the value of leisure time, national income accounting understates our well-being. Leisure time contributes to personal happiness, health, and overall quality of life, which are not reflected in measures like GDP. Therefore, the well-being of individuals is higher than what is indicated by national income accounting alone.

4. It has no effect on well-being:

   • This option is incorrect. Ignoring leisure time in national income accounting does have an effect on the perceived well-being. It leads to an incomplete picture of well-being by not considering the benefits derived from leisure activities.

In summary, national income accounting that ignores the value of leisure time understates our well-being because it fails to capture the full spectrum of factors that contribute to a good quality of life.