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If reconstruction spending after a natural disaster raises nominal and real GDP, what does this increase not prove?

Answer and explanation

Correct answer: All social losses were fully offset

Reconstruction spending represents newly produced construction and repair services, which can raise measured GDP. But GDP does not subtract all the damage caused by the disaster, such as destroyed homes, infrastructure, or lost well-being. A rise in GDP therefore does not prove that all social losses were offset. B is correct.

Related tags

Gdp And DisastersReconstruction And WelfareGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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