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If crime declines and demand for private security services falls, what is possible?

Answer and explanation

Correct answer: Some market activity may fall while welfare rises

GDP counts paid production and expenditure, not every improvement in safety or peace of mind. When crime falls, households and firms may spend less on private security, so that particular market activity can decline. However, people may experience greater safety, less fear and fewer losses, which raises social welfare. Therefore option D is correct. A wrongly assumes GDP and welfare always move together, while B and C are false.

Related tags

Crime ReductionPrivate SecurityWelfare MeasurementGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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