If domestic violence declines without any new market transaction what effect on GDP and welfare is possible?
Answer and explanation
Correct answer: GDP may remain unchanged while welfare rises
GDP is based mainly on measured market production and expenditure, so a reduction in domestic violence may not create a separately recorded transaction. Nevertheless, greater safety, dignity, mental well-being and freedom from harm are real improvements in welfare. Thus GDP may remain unchanged while welfare rises. Option B incorrectly treats GDP as a complete welfare index; C claims a necessary fall without evidence; and D ignores non-market social benefits.
Frequently asked questions
What is the correct answer to this question?
GDP may remain unchanged while welfare rises
Why is this the correct answer?
GDP is based mainly on measured market production and expenditure, so a reduction in domestic violence may not create a separately recorded transaction. Nevertheless, greater safety, dignity, mental well-being and freedom from harm are real improvements in welfare. Thus GDP may remain unchanged while welfare rises. Option B incorrectly treats GDP as a complete welfare index; C claims a necessary fall without evidence; and D ignores non-market social benefits.
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.
