If everyone feels safer but the improvement occurs without additional market production what will happen?
Answer and explanation
Correct answer: Welfare may rise while GDP remains unchanged
GDP is an indicator of measured market production and expenditure, not a complete index of quality of life. A genuine improvement in safety can increase people’s utility and welfare even when no extra service is bought or sold. Thus recorded GDP may remain unchanged while welfare rises, making option D correct. Options A and B treat GDP as an automatic measure of every social improvement.
Frequently asked questions
What is the correct answer to this question?
Welfare may rise while GDP remains unchanged
Why is this the correct answer?
GDP is an indicator of measured market production and expenditure, not a complete index of quality of life. A genuine improvement in safety can increase people’s utility and welfare even when no extra service is bought or sold. Thus recorded GDP may remain unchanged while welfare rises, making option D correct. Options A and B treat GDP as an automatic measure of every social improvement.
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.
