If government spending on prisons rises because crime increases what is the correct interpretation?
Answer and explanation
Correct answer: GDP may rise while safety-related welfare declines
Government-provided prison services are counted in GDP through the cost or value of public production. However, if spending rises because crime has increased, the expenditure may be defensive: it responds to damage or insecurity rather than representing an improvement in people’s lives. GDP can therefore rise while safety and welfare deteriorate. B is factually incorrect, and A, C ignore the reason and social cost behind the spending.
Frequently asked questions
What is the correct answer to this question?
GDP may rise while safety-related welfare declines
Why is this the correct answer?
Government-provided prison services are counted in GDP through the cost or value of public production. However, if spending rises because crime has increased, the expenditure may be defensive: it responds to damage or insecurity rather than representing an improvement in people’s lives. GDP can therefore rise while safety and welfare deteriorate. B is factually incorrect, and A, C ignore the reason and social cost behind the spending.
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.
