Comprehension Passage
GDP growth is the most widely used macroeconomic indicator for adjudicating broad economic progress. The outcomes from decisions made on the basis of such an indicator have been repeatedly disappointing because of failures to detect resource uses that turn out to be unsustainable. Adjusted Net Savings (ANS) provides a complementary indicator to help in understanding the changes in wealth and not per capita wealth, by capturing some of the important policy-induced dynamics. Based on the conventions of the System of National Accounts (SNA), ANS is measured as Gross National Saving minus depreciation of produced capital, depletion of subsoil assets and timber resources, and air pollution damages to human health, plus a credit for expenditures on education. If ANS is negative, the county is running down its capital stocks and possibly reducing future material well-being. If ANS is positive the country is adding to wealth and future material well-being. When natural resource depletion is not used to invest in other assets in the wealth portfolio, countries gross saving might not be enough to compensate this depletion resulting in negative net savings. However, nations with higher GDP are far less likely to obtain negative ANS. It is argued that, if not a superior indicator of sustainability. ANS is useful to the extent that it can serve as an indicator of unsustainability. Hence, the estimates and conceptualization of ANS are not free from limitations.
Which of the following explains the decline in ANS in countries with increasing GDP per capita?
1
Increasing proportion of private investment in an economy
2
Depleted assets not offset by sufficient investment in human and physical capital
3
Increasing gross saving rates
4
Increasing production of renewable natural capital