If GDP growth mainly comes from polluting industries, what conclusion should be drawn about welfare?
Answer and explanation
Correct answer: Welfare may not necessarily increase
GDP measures the monetary value of recorded production, but it does not automatically subtract all environmental damage caused during that production. Pollution can reduce health, quality of life and future productive capacity, even while industrial output raises GDP. Therefore, GDP growth alone cannot prove that social welfare has increased. A proper welfare assessment should also consider environmental costs, distribution of income, public health and sustainability.
Frequently asked questions
What is the correct answer to this question?
Welfare may not necessarily increase
Why is this the correct answer?
GDP measures the monetary value of recorded production, but it does not automatically subtract all environmental damage caused during that production. Pollution can reduce health, quality of life and future productive capacity, even while industrial output raises GDP. Therefore, GDP growth alone cannot prove that social welfare has increased. A proper welfare assessment should also consider environmental costs, distribution of income, public health and sustainability.
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.
