Gross domestic product (GDP) is not a perfect measure of welfare because it:

A) treats a dollar spent on guns the same as a dollar spent on education.
B) treats a dollar spent on exports the same as a dollar spent on imports.
C) double counts the value of leisure time.
D) double counts depreciation.
E) counts illegal activities in the underground economy.

GDP does not take into account the composition of spending or the nature of economic activity. It treats a dollar spent on goods and services that improve the welfare of citizens, such as education, the same as a dollar spent on goods and services that do not improve welfare, like military spending. This means that GDP overestimates the economic welfare of society. Therefore, choice A is the best answer. Choice B refers to the issue of net exports, not to the welfare of society. Choice C is not applicable as leisure time is not included in GDP. Choice D refers to the issue of the depreciation of capital stock, not to the welfare of society. Choice E is correct, but it is less significant than choice A as the underground economy is relatively small compared to the overall GDP.