Defence equipment production is included in GDP but why should welfare conclusions be drawn carefully?
Answer and explanation
Correct answer: Every defence good does not directly increase consumer satisfaction
The governing concept is that GDP measures the market value of final goods and services, not complete social welfare. Defence equipment is included because government production or spending has economic value, and it may improve national security. However, it may not provide direct, everyday consumer satisfaction in the same way as food, housing, or healthcare. Therefore, option A is correct; B, C, and D make false absolute claims.
Frequently asked questions
What is the correct answer to this question?
Every defence good does not directly increase consumer satisfaction
Why is this the correct answer?
The governing concept is that GDP measures the market value of final goods and services, not complete social welfare. Defence equipment is included because government production or spending has economic value, and it may improve national security. However, it may not provide direct, everyday consumer satisfaction in the same way as food, housing, or healthcare. Therefore, option A is correct; B, C, and D make false absolute claims.
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.
