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If traffic congestion raises fuel consumption and vehicle-repair expenditure in a city, what is possible?

Answer and explanation

Correct answer: GDP may rise but welfare may fall due to time loss and pollution

Fuel purchases and paid vehicle repairs are market transactions, so their increased value can raise measured GDP. Yet congestion also creates unpaid time loss, stress, fuel waste and pollution, which are not fully deducted from GDP and can lower quality of life. Option C is correct because it recognizes both effects. A is too certain, while B and D ignore the recorded spending and welfare costs.

Related tags

Traffic CongestionTime CostPollutionGdp WelfareGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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