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If a country's real GDP rises but access to clean drinking water declines, what is the most appropriate conclusion regarding welfare?

Answer and explanation

Correct answer: Health-related welfare may fall despite rising real GDP

The governing concept is the limitation of GDP as a welfare measure. Real GDP records the inflation-adjusted value of market production, but it does not fully capture health, environmental quality, distribution, or access to essential services. If clean drinking water becomes less available, illness risk and quality of life may worsen even while output rises. Therefore option C is correct. The other choices wrongly assume GDP and welfare always move proportionally or make unsupported claims about nominal GDP.

Related tags

Real GdpWelfareClean WaterHealthQuality Of LifeGdp And WelfareNational Income And Related AggregatesEconomics

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