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If real GDP rises by four percent but the estimated cost of environmental damage rises by six percent what is the most appropriate conclusion?

Answer and explanation

Correct answer: Net welfare improvement may be doubtful or negative

The governing idea is that GDP records gross market output, not every social cost. A 4% rise in real GDP shows greater inflation-adjusted production, but a 6% rise in environmental damage can offset or exceed the associated benefit. Hence B is correct: net welfare improvement is uncertain and could be negative. A ignores costs, while C and D are false.

Related tags

Environmental CostReal GdpNet WelfareGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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