In which situation may GDP rise while welfare falls?

Correct answer: When polluting production increases

A central welfare principle is that an increase in measured production can create negative externalities. If polluting factories produce and sell more goods, the value of that output may raise GDP, but polluted air or water can damage health and reduce quality of life. Option D is therefore correct. Clean water, more schools, and vaccination generally improve welfare, although their full benefits may not all appear in GDP.