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Private vehicle sales raised GDP in a city, but traffic congestion also increased greatly. What conclusion is appropriate?

Answer and explanation

Correct answer: GDP growth need not cause an equal rise in welfare

Vehicle purchases are market transactions and can increase measured GDP. However, heavier congestion creates external costs such as wasted travel time, extra fuel use, stress, and pollution. These costs may reduce welfare even though they are not fully deducted from GDP. Thus A is the balanced conclusion. B is false, C is too absolute because vehicles can provide benefits, and D ignores congestion’s social effects.

Related tags

Traffic CongestionVehicle SalesExternal CostGdp WelfareGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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