A country's real GDP rose by five percent but the estimated cost of pollution treatment rose by seven percent. Which conclusion is more appropriate?
Answer and explanation
Correct answer: The net welfare improvement may be doubtful
Real GDP measures the volume of recorded production after removing price changes, but it does not automatically subtract environmental damage. If pollution-treatment costs rise by seven percent while real GDP rises by only five percent, the resources devoted to repairing harm may offset or exceed the apparent gain. B is the careful conclusion: net welfare is uncertain, not necessarily higher or lower. The other options are absolute and unsupported.
Frequently asked questions
What is the correct answer to this question?
The net welfare improvement may be doubtful
Why is this the correct answer?
Real GDP measures the volume of recorded production after removing price changes, but it does not automatically subtract environmental damage. If pollution-treatment costs rise by seven percent while real GDP rises by only five percent, the resources devoted to repairing harm may offset or exceed the apparent gain. B is the careful conclusion: net welfare is uncertain, not necessarily higher or lower. The other options are absolute and unsupported.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates. Topic: GDP and Welfare.
