If GDP growth comes only from increased weapon production, which conclusion about welfare is appropriate?
Answer and explanation
Correct answer: Welfare should be concluded cautiously
Weapon production is counted in GDP when it represents current domestic production, so GDP can rise. However, GDP does not show how output is distributed, whether people prefer military goods to civilian goods, or the social and opportunity costs of defence spending. Therefore, GDP growth alone cannot prove a proportional increase in welfare.
Frequently asked questions
What is the correct answer to this question?
Welfare should be concluded cautiously
Why is this the correct answer?
Weapon production is counted in GDP when it represents current domestic production, so GDP can rise. However, GDP does not show how output is distributed, whether people prefer military goods to civilian goods, or the social and opportunity costs of defence spending. Therefore, GDP growth alone cannot prove a proportional increase 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.
