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Which option is most likely to make GDP growth overstate welfare growth?

Answer and explanation

Correct answer: Polluting production rises rapidly while environmental damage is unrecorded

GDP measures the market value of production but normally does not subtract the full social cost of pollution. If polluting output rises rapidly, measured GDP can increase even while air quality, health, and environmental conditions worsen. Hence option C best shows GDP overstating welfare growth. Falling illness expenditure, more voluntary leisure, and a more equal distribution generally improve welfare rather than create this overstatement.

Related tags

GdpWelfarePollutionExternal-CostOverstatementGdp And WelfareNational Income And Related AggregatesEconomics

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