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What should be understood if repair spending rises after a natural disaster in GDP?

Answer and explanation

Correct answer: GDP may rise, but welfare loss may also occur

Payments for rebuilding houses, roads, and other damaged assets purchase current goods and services, so they can increase measured GDP. Nevertheless, the disaster may have destroyed property, caused injuries, displacement, and emotional hardship. GDP records the reconstruction activity but does not fully subtract the original welfare loss.

Related tags

EconomicsGdpWelfareNatural DisasterRepair SpendingGdp And WelfareNational Income And Related AggregatesClass 11 Mcq

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