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Which of the following most clearly shows the effect of the composition of GDP on welfare?

Answer and explanation

Correct answer: Equal values of healthcare and harmful goods may have different welfare effects

The governing concept is the composition, or quality, of output. GDP adds the monetary value of final goods and services, but equal monetary totals do not guarantee equal social usefulness. Healthcare can improve health and capabilities, whereas harmful goods may create addiction, illness, or social costs. Therefore option C is correct. Options A, B, and D wrongly assume that only the amount of output matters and ignore what is being produced.

Related tags

Composition Of GdpHealthcareHarmful GoodsWelfare MeasurementGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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