If domestic output rises but a large share is exported and domestic consumption falls, what can be said about public welfare?
Answer and explanation
Correct answer: Welfare associated with domestic consumption may fall despite higher GDP
GDP measures production within national borders, regardless of whether the output is consumed domestically or sold abroad. Exports can bring foreign exchange and future benefits, but they do not prove that current residents receive more goods or that gains are distributed fairly. If domestic availability and consumption fall, welfare related to present consumption may decline even as GDP rises. Therefore A is correct; B is an unjustified universal claim, C contradicts the stated rise, and D ignores consumption’s role in welfare.
Frequently asked questions
What is the correct answer to this question?
Welfare associated with domestic consumption may fall despite higher GDP
Why is this the correct answer?
GDP measures production within national borders, regardless of whether the output is consumed domestically or sold abroad. Exports can bring foreign exchange and future benefits, but they do not prove that current residents receive more goods or that gains are distributed fairly. If domestic availability and consumption fall, welfare related to present consumption may decline even as GDP rises. Therefore A is correct; B is an unjustified universal claim, C contradicts the stated rise, and D ignores consumption’s role in welfare.
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.
