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Why may welfare assessment based on GDP be misleading if crime raises private security and medical spending?

Answer and explanation

Correct answer: Because higher spending may raise GDP while safety and health worsen

The governing concept is defensive expenditure. Market purchases of private guards, alarms, treatment, or medicines are counted in GDP because they represent paid production. However, the spending may be a response to crime and illness, which have already reduced safety and well-being. Thus option C is correct: measured output can rise even while the underlying social condition worsens. The other options wrongly deny either GDP inclusion or the social cost of crime.

Related tags

CrimeDefensive ExpenditureGdp And WelfareSecurity SpendingNational Income And Related AggregatesEconomicsClass 11 Mcq

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