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If crime increases and spending on security services rises, what may happen to GDP?

Answer and explanation

Correct answer: GDP may rise while welfare falls

GDP records market expenditure on final goods and services, not the reason that generated the expenditure. If rising crime causes households, firms, or the government to purchase more security services, that additional market production can raise GDP. However, crime reduces safety and quality of life, so welfare may decline at the same time. Thus option C is correct; the other options wrongly assume GDP and welfare always move together.

Related tags

CrimeDefensive ExpenditureGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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