If government medical spending rises sharply because of a pandemic, which conclusion would be incorrect?
Answer and explanation
Correct answer: Higher GDP necessarily means public welfare increased
GDP records the value of produced medical services, so pandemic-related treatment expenditure can increase measured GDP. However, the same spending may be a response to widespread illness, deaths and loss of normal activity. Welfare must therefore be judged with health outcomes and other non-market effects, not GDP alone. Option D is incorrect because a rise in measured expenditure does not necessarily mean that public welfare has improved.
Frequently asked questions
What is the correct answer to this question?
Higher GDP necessarily means public welfare increased
Why is this the correct answer?
GDP records the value of produced medical services, so pandemic-related treatment expenditure can increase measured GDP. However, the same spending may be a response to widespread illness, deaths and loss of normal activity. Welfare must therefore be judged with health outcomes and other non-market effects, not GDP alone. Option D is incorrect because a rise in measured expenditure does not necessarily mean that public welfare has improved.
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.
