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What can be said about welfare if reconstruction after a natural disaster raises GDP?

Answer and explanation

Correct answer: GDP may rise while the disaster may have reduced welfare

GDP counts paid reconstruction activity because workers, materials, and construction services generate measured market output. However, the disaster may simultaneously destroy homes, assets, health, lives, and peace of mind. Therefore higher GDP does not prove higher welfare, making option D correct. The other choices confuse increased spending after damage with an improvement in overall well-being.

Related tags

Natural DisasterReconstructionGdp WelfareGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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