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What is possible when reconstruction spending rises after a natural disaster?

Answer and explanation

Correct answer: Reconstruction may raise GDP while the disaster may have reduced welfare

GDP records the value of current market production, so construction and repair undertaken after a disaster can increase measured GDP. However, welfare also depends on lives lost, homes destroyed, insecurity and environmental damage. Thus option D is correct: reconstruction may raise GDP even when the disaster has lowered overall welfare. The other options use unjustified absolute claims.

Related tags

Natural DisasterReconstruction SpendingGdpWelfareGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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