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In a city house rents rise increasing the monetary value of housing services while actual living quality remains unchanged. What caution is needed in welfare analysis?

Answer and explanation

Correct answer: Do not always treat a higher monetary value as more real service

The governing concept is the distinction between nominal value and real output. A rise in rent can increase the money value assigned to housing services without improving their quantity, quality, safety, or comfort. Therefore, welfare analysis should adjust for price changes and examine real services. Option A is correct; B is false because measured rent can enter GDP, while C and D confuse price or one indicator with actual welfare.

Related tags

Housing-RentPrice-AdjustmentReal-ServicesGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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