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If the quantity of goods rises but their quality falls sharply, what problem arises in relating GDP to welfare?

Answer and explanation

Correct answer: Quantitative growth may overstate the rise in actual satisfaction

GDP primarily records the market value of measured production, and a rise in quantity can make output appear larger. If quality deteriorates substantially, however, consumers may receive less satisfaction, durability or usefulness from those goods. The quantitative GDP increase may therefore exaggerate the improvement in welfare. C is correct; A, B and D make absolute claims that do not follow from the concept.

Related tags

Product QualityGdp LimitationConsumer WelfareGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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