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If government spending on prisons rises because crime increases what is the correct interpretation?

Answer and explanation

Correct answer: GDP may rise while safety-related welfare declines

Government-provided prison services are counted in GDP through the cost or value of public production. However, if spending rises because crime has increased, the expenditure may be defensive: it responds to damage or insecurity rather than representing an improvement in people’s lives. GDP can therefore rise while safety and welfare deteriorate. B is factually incorrect, and A, C ignore the reason and social cost behind the spending.

Related tags

Prison SpendingCrimeGovernment ServicesWelfareGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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