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If a country's GDP rises mainly because more luxury goods are produced instead of essential goods, what may happen to welfare?

Answer and explanation

Correct answer: Welfare need not rise equally

The governing concept is that GDP measures the market value of final output, not the fairness, usefulness, or distribution of that output. If production increases mainly for luxury consumption while essential goods remain scarce or unaffordable, aggregate GDP can rise without improving the living conditions of most people. Therefore, option B is correct. Option A is too absolute; C and D do not logically follow from a change in the composition of output.

Related tags

GdpWelfareComposition Of OutputLuxury GoodsEssential GoodsGdp And WelfareNational Income And Related AggregatesEconomics

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