If GDP remains constant but the crime rate falls greatly, what may happen to social welfare?
Answer and explanation
Correct answer: Welfare may rise because safety improves
GDP measures the market value of final goods and services, but it does not fully capture safety, freedom from fear, or peace of mind. If crime falls while recorded output stays unchanged, people may feel safer and spend less time and money protecting themselves. Therefore, social welfare may increase even though GDP is constant. Options A, B, and C ignore this important non-market improvement.
Frequently asked questions
What is the correct answer to this question?
Welfare may rise because safety improves
Why is this the correct answer?
GDP measures the market value of final goods and services, but it does not fully capture safety, freedom from fear, or peace of mind. If crime falls while recorded output stays unchanged, people may feel safer and spend less time and money protecting themselves. Therefore, social welfare may increase even though GDP is constant. Options A, B, and C ignore this important non-market 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.
