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If GDP remains constant but the crime rate falls greatly, what may happen to social welfare?

Answer and explanation

Correct answer: Welfare may rise because safety improves

GDP measures the market value of final goods and services, but it does not fully capture safety, freedom from fear, or peace of mind. If crime falls while recorded output stays unchanged, people may feel safer and spend less time and money protecting themselves. Therefore, social welfare may increase even though GDP is constant. Options A, B, and C ignore this important non-market improvement.

Related tags

Crime ReductionSafetySocial WelfareGdp LimitationsGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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