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If private security spending falls because crime declines what difference between GDP and welfare is possible?

Answer and explanation

Correct answer: Some GDP activity may fall while welfare rises

Private security services are market activities and their reduced purchase can lower measured GDP, all else being equal. Yet the fall in spending is caused by lower crime, which improves safety, reduces fear, and frees resources for other uses. These non-market benefits raise welfare even though a defensive expenditure has declined. Therefore D is correct. A and C wrongly assume that lower spending always means lower welfare, while B has no necessary basis.

Related tags

Crime ReductionDefensive SpendingGdp And WelfareSafetyNational Income And Related AggregatesEconomicsClass 11 Mcq

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