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Defence equipment production is included in GDP but why should welfare conclusions be drawn carefully?

Answer and explanation

Correct answer: Every defence good does not directly increase consumer satisfaction

The governing concept is that GDP measures the market value of final goods and services, not complete social welfare. Defence equipment is included because government production or spending has economic value, and it may improve national security. However, it may not provide direct, everyday consumer satisfaction in the same way as food, housing, or healthcare. Therefore, option A is correct; B, C, and D make false absolute claims.

Related tags

Defence ExpenditureGdp CompositionWelfareGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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