If a large share of a country's output is exported and the availability of essential goods at home declines, what is possible?
Answer and explanation
Correct answer: GDP may rise while domestic consumption welfare declines
Exports are included in GDP because they represent domestic production sold abroad. However, if exporting reduces the quantity of essential goods available to residents, domestic consumption and welfare may suffer, especially for vulnerable households. GDP can therefore increase without a corresponding rise in domestic well-being. The words “necessarily” and “must” make B and D incorrect.
Frequently asked questions
What is the correct answer to this question?
GDP may rise while domestic consumption welfare declines
Why is this the correct answer?
Exports are included in GDP because they represent domestic production sold abroad. However, if exporting reduces the quantity of essential goods available to residents, domestic consumption and welfare may suffer, especially for vulnerable households. GDP can therefore increase without a corresponding rise in domestic well-being. The words “necessarily” and “must” make B and D incorrect.
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.
