An economy increases timber output by cutting natural forests. What is the correct analysis of present and future welfare?
Answer and explanation
Correct answer: Current GDP may rise but future welfare may fall
GDP records the market value of timber produced, so cutting forests can raise current measured output. However, welfare is broader than GDP and includes environmental quality, biodiversity, and the availability of resources for future generations. Depletion may therefore impose future costs that are not fully deducted from current GDP. Hence C is correct; A ignores sustainability, while B and D are too narrow.
Frequently asked questions
What is the correct answer to this question?
Current GDP may rise but future welfare may fall
Why is this the correct answer?
GDP records the market value of timber produced, so cutting forests can raise current measured output. However, welfare is broader than GDP and includes environmental quality, biodiversity, and the availability of resources for future generations. Depletion may therefore impose future costs that are not fully deducted from current GDP. Hence C is correct; A ignores sustainability, while B and D are too narrow.
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.
