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Why does the composition of GDP affect welfare?

Answer and explanation

Correct answer: Useful and harmful goods of equal value may have different welfare effects

GDP aggregates the monetary value of final goods and services, but equal monetary values do not imply equal social benefits. Education, nutritious food or preventive care may improve capabilities, whereas pollution-generating or harmful goods may impose social costs. Consequently, the composition and purpose of production matter for welfare, not merely its total value. C states this distinction accurately; A, B and D incorrectly treat all output as socially equivalent.

Related tags

Composition Of GdpUseful GoodsHarmful GoodsGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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