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Why may GDP growth driven mainly by pollution cleanup and accident treatment not be considered welfare-enhancing growth?

Answer and explanation

Correct answer: Because they are activities compensating for earlier damage

Pollution cleanup, medical treatment after accidents, and similar defensive activities are genuine production, so their market value can enter GDP. However, they may mainly restore health, safety, or environmental quality lost through earlier damage rather than create an equivalent new improvement in net welfare. GDP records the spending but does not subtract the original loss automatically. Therefore C is the most accurate conclusion; A and B are factually wrong, and D is an unjustified generalization.

Related tags

Cleanup SpendingAccident TreatmentDefensive ActivityGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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