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.
Frequently asked questions
What is the correct answer to this question?
It raises medical output but may conceal welfare losses from illness and pollution
Why is this the correct answer?
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.
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.
