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Why does an increase in NNP not always mean that economic welfare has increased?

Answer and explanation

Correct answer: Environmental damage and inequality may not be reflected

NNP is a monetary measure of net production, but welfare is broader than measured income. NNP may rise because production increases even when pollution, congestion, resource depletion, or unsafe working conditions worsen. It also does not show how income is distributed; most gains may go to a small group. Therefore, environmental quality and distribution must be considered before concluding that welfare has improved.

Related tags

EconomicsNnp And WelfareEnvironmentInequalityNational IncomeGdp And WelfareNational Income And Related AggregatesClass 11 Mcq

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