If a large part of GDP growth comes from accident repairs and medical treatment what caution is needed?
Answer and explanation
Correct answer: This growth may be compensation for earlier damage
The governing concept is the limitation of GDP as a welfare measure, especially defensive expenditure. Accident repairs and medical treatment are counted as market production, so they can raise GDP. However, they may only restore vehicles, health or property lost through an earlier accident. Thus option D is correct. GDP records the expenditure but does not subtract the original suffering or damage automatically.
Frequently asked questions
What is the correct answer to this question?
This growth may be compensation for earlier damage
Why is this the correct answer?
The governing concept is the limitation of GDP as a welfare measure, especially defensive expenditure. Accident repairs and medical treatment are counted as market production, so they can raise GDP. However, they may only restore vehicles, health or property lost through an earlier accident. Thus option D is correct. GDP records the expenditure but does not subtract the original suffering or damage automatically.
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.
