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In which situation can GDP growth wrongly overstate growth in economic welfare?

Answer and explanation

Correct answer: When output rises by increasing pollution

GDP measures the value of marketed production, but it does not fully account for environmental damage, health costs, or the unequal distribution of benefits. If output rises because firms create more pollution, measured GDP may increase even while people suffer illness and reduced environmental quality. Thus, GDP growth can overstate welfare growth. Option A is the clearest example.

Related tags

Gdp And WelfarePollutionEnvironmental CostEconomic WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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