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If arms production rises after a conflict, GDP may rise, but why may economic welfare not rise?

Answer and explanation

Correct answer: Because output does not reflect the loss of quality of life and safety

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.

Related tags

Gdp And WelfareArms ProductionSocial CostQuality Of LifeConflictNational Income And Related AggregatesEconomicsClass 11 Mcq

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