If a disease outbreak greatly increases sales of medicines and hospital services, what may be the relationship between GDP and welfare?
Answer and explanation
Correct answer: GDP may rise while welfare falls because of the disease
Medical treatment purchased in markets is recorded as final expenditure and can raise measured GDP. But the disease creates pain, lost health, reduced activity, and other welfare losses. The increase in medical sales may therefore reflect defensive spending needed to repair harm rather than improved well-being. Option B correctly separates production measurement from welfare. Option C is false because medical services can be final services, and A and D overstate the evidence.
Frequently asked questions
What is the correct answer to this question?
GDP may rise while welfare falls because of the disease
Why is this the correct answer?
Medical treatment purchased in markets is recorded as final expenditure and can raise measured GDP. But the disease creates pain, lost health, reduced activity, and other welfare losses. The increase in medical sales may therefore reflect defensive spending needed to repair harm rather than improved well-being. Option B correctly separates production measurement from welfare. Option C is false because medical services can be final services, and A and D overstate the evidence.
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.
