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When is the positive relationship between GDP and economic welfare most reliable?

Answer and explanation

Correct answer: When real output per capita rises and negative externalities are limited

GDP is most useful as a broad welfare signal when real production available per person increases, because this suggests greater average command over goods and services. The relationship is also more reliable when pollution, congestion, insecurity, and other negative externalities are limited and distribution is not severely unequal. Therefore option C provides the appropriate conditions. Options A, B, and D weaken the connection between aggregate output and actual welfare.

Related tags

GdpWelfareReal-GdpPer-CapitaExternalitiesGdp And WelfareNational Income And Related AggregatesEconomics

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