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Which reason may cause economic welfare to fall despite an increase in real GDP?

Answer and explanation

Correct answer: Rising income inequality and environmental damage

Real GDP measures the market value of final goods and services produced, adjusted for prices, but it is not a complete measure of welfare. A rise in GDP can coexist with greater income inequality, pollution, resource depletion, congestion, or stress. If the gains are concentrated and environmental costs increase, many people may be worse off even though measured real output rises. Therefore option A is the valid reason.

Related tags

Real GdpWelfareIncome InequalityEnvironmental DamageEconomic WelfareGdp And WelfareNational Income And Related AggregatesEconomics

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