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If polluting production raises NDP by 500 crore rupees but estimated environmental damage is 650 crore rupees, which statement about conventional NDP and welfare is appropriate?

Answer and explanation

Correct answer: Conventional NDP rises but net welfare may fall

The governing concept is the limitation of conventional NDP as a welfare indicator. Market production generally increases measured NDP by ₹500 crore, but conventional accounting may not deduct the full external environmental cost. If damage is ₹650 crore, the unrecorded social loss can exceed the measured gain, so welfare may fall. Option A is correct; the other statements confuse output measurement with welfare or depreciation.

Related tags

EconomicsNdp And WelfareEnvironmental DamageGreen AccountingExternalitiesGdp And WelfareNational Income And Related AggregatesClass 11 Mcq

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