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Health-care spending rises because pollution-related illnesses have increased. What is the correct analysis of the rise in GDP?

Answer and explanation

Correct answer: It raises medical output but may conceal welfare losses from illness and pollution

Market-based medical services are counted as current production, so increased spending on consultations, medicines, or hospital treatment can raise measured GDP. However, GDP does not subtract the pain, lost quality of life, or environmental damage that caused the illnesses. Such spending may be defensive or remedial expenditure: it responds to a problem rather than representing a pure improvement in welfare. Therefore, higher GDP here does not necessarily mean better health.

Related tags

Health ExpenditurePollutionDefensive ExpenditureGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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