GDP and Welfare

Weapon production is counted in GDP when it represents current domestic production, so GDP can rise. However, GDP does not show how output is distributed, whether people prefer military goods to civilian goods, or the social and opportunity costs of defence spending. Therefore, GDP growth alone cannot prove a proportional increase in welfare.

GDP records the market value of final goods and services produced, but it does not directly value leisure, unpaid household work, stress, or the disutility of longer working hours. Thus, GDP may increase while an important non-monetary component of welfare declines. GDP growth alone cannot prove proportional growth in overall welfare.

Economic territory is not identical to a country's physical geographical boundaries. It includes certain enclaves such as embassies and diplomatic missions located abroad. Therefore, an Indian embassy in Japan is treated as part of India's economic territory for national accounting purposes. The production or services associated with it are considered under the relevant accounting rules of India.

Per capita GDP is calculated by dividing total GDP by the population. It gives an average measure of output or income per person and helps compare economic performance across countries or time periods with different population sizes. It does not show the actual income of every person or the distribution of income, but it adjusts total GDP for population size.

GDP measures the market value of final goods and services produced within an economy, but it does not show how the resulting income is distributed among households. A country may have a high GDP while a large share of income goes to a small group. Consequently, GDP alone cannot fully describe equality, poverty, or overall economic welfare. Option A states this limitation correctly.

Expenditure on pollution-control or cleanup services may involve current production, so it can increase measured GDP. However, GDP may not subtract the full health, environmental, and quality-of-life damage caused by the pollution itself. Thus, higher GDP from cleanup activity does not automatically mean higher welfare. Environmental costs must be considered separately when evaluating social well-being.

GDP records the market value of current production, but it does not fully subtract the loss of natural capital such as forests, minerals, or biodiversity. Therefore, output may increase while environmental assets are being depleted, creating an incomplete picture of sustainable economic welfare. This limitation motivates measures such as green GDP, which attempt to account for environmental damage and resource depletion.

GDP mainly records the market value of goods and services produced. When quality improves without a corresponding increase in the observed price, the statistical measure may fail to capture the complete benefit received by consumers. Thus, GDP can underestimate welfare gains from better healthcare, education, safety, or product quality.

GDP records the market value of currently produced final goods and services. A paid domestic worker provides a service exchanged in the market, so the wage is counted. Unpaid household work usually has no observable market transaction and is therefore omitted, even though it provides real usefulness and may improve household welfare. This illustrates that GDP can understate welfare by neglecting non-market services.

GDP records the value of market production, including legally produced arms, but it is not a complete measure of human welfare. A conflict may cause deaths, insecurity, displacement, psychological harm, and destruction of homes and infrastructure. These social costs may be absent from GDP or inadequately measured. Consequently, higher arms production can increase GDP while overall welfare falls. Option A is correct.

Expenditure on river cleaning is a paid service and can increase measured GDP. However, if the cleaning merely repairs damage caused by earlier pollution, it may restore environmental quality rather than create a comparable net improvement in welfare. GDP records the defensive activity but does not clearly subtract the original environmental loss. This illustrates why defensive expenditure can make welfare appear higher than it really is. Option A is correct.

GDP is an aggregate measure of the value of production or income generated in an economy. It does not show how that income is distributed among households or groups. Therefore, GDP can increase while most people receive little or no benefit if gains are concentrated among a small group. Measures such as inequality indicators, poverty rates, and per-capita distribution are needed to assess welfare more fully. Option A is correct.

The output of a polluting factory has a market price and is therefore included in GDP as current production. However, GDP records the value of the goods produced and does not fully subtract external costs such as air pollution, health damage, ecological loss, or reduced quality of life. Thus, GDP may rise even when social welfare does not rise by the same amount.

GDP measures the market value of final goods and services produced, but it does not directly measure leisure, happiness, stress, or the distribution of income. Longer working hours may increase recorded output while reducing rest and personal time. Therefore, GDP growth alone cannot provide a complete picture of welfare or quality of life; ignoring leisure is an important limitation of using GDP as a welfare indicator.

Total GDP indicates the size of an economy’s production, whereas per capita GDP is calculated by dividing GDP by population and indicates the average output or income level per person. Considering both measures gives a broader picture: total GDP shows economic scale, while per capita GDP helps compare average material availability across countries or across time. However, it still does not fully capture inequality or welfare.

The relationship is NDP = GDP − Depreciation. To find GDP, rearrange it as GDP = NDP + Depreciation. Substituting the given values gives GDP = 840 + 60 = 900 crore rupees. Therefore, option B is correct. Depreciation is added when moving from a net measure back to the corresponding gross measure.

NDP measures the value of currently produced final goods and services within the domestic territory, after deducting depreciation. The old house itself was produced in an earlier year, and share repurchase is a financial transaction rather than current production. A broker’s service supplied in the current year is a newly produced market service, so its fee is included in current-year NDP.

An increase in NDP indicates higher net domestic production, but it is not a complete measure of welfare. Welfare also depends on how income is distributed, whether production causes pollution, the quality of goods and services, leisure, health, security, and unpaid activities. Therefore, NDP may rise while some groups experience no improvement or environmental damage increases.

NDP records the value of measured domestic production after deducting depreciation, but it may not fully subtract every environmental cost caused by production. If a polluting industry expands, NDP can increase even as health, environmental quality, and people’s quality of life deteriorate. Thus, the net welfare effect cannot be determined from the rise in NDP alone.

The income method measures NDP at factor cost by adding the factor incomes generated in domestic production: compensation of employees, operating surplus and mixed income. Hence NDP at factor cost = 1,300 + 780 + 420 = 2,500 crore rupees. Option B is correct. The other choices reflect incomplete addition or an unjustified extra amount; no depreciation or net factor income adjustment is required for this stated aggregate.