If a production process harms workers' health and raises demand for medical services, what may GDP show?
Answer and explanation
Correct answer: Growth from both production and medical spending while net welfare falls
GDP records the market value of production and paid medical treatment, but it does not automatically subtract the workers' pain, illness, lost quality of life, or other unpriced harm. Consequently, the harmful output and the additional medical spending can both increase measured GDP even while overall welfare declines. Option C captures this distinction between recorded market activity and net welfare; the other choices ignore one of these effects.
Frequently asked questions
What is the correct answer to this question?
Growth from both production and medical spending while net welfare falls
Why is this the correct answer?
GDP records the market value of production and paid medical treatment, but it does not automatically subtract the workers' pain, illness, lost quality of life, or other unpriced harm. Consequently, the harmful output and the additional medical spending can both increase measured GDP even while overall welfare declines. Option C captures this distinction between recorded market activity and net welfare; the other choices ignore one of these effects.
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.
