If private security spending falls because crime declines what difference between GDP and welfare is possible?
Answer and explanation
Correct answer: Some GDP activity may fall while welfare rises
Private security services are market activities and their reduced purchase can lower measured GDP, all else being equal. Yet the fall in spending is caused by lower crime, which improves safety, reduces fear, and frees resources for other uses. These non-market benefits raise welfare even though a defensive expenditure has declined. Therefore D is correct. A and C wrongly assume that lower spending always means lower welfare, while B has no necessary basis.
Frequently asked questions
What is the correct answer to this question?
Some GDP activity may fall while welfare rises
Why is this the correct answer?
Private security services are market activities and their reduced purchase can lower measured GDP, all else being equal. Yet the fall in spending is caused by lower crime, which improves safety, reduces fear, and frees resources for other uses. These non-market benefits raise welfare even though a defensive expenditure has declined. Therefore D is correct. A and C wrongly assume that lower spending always means lower welfare, while B has no necessary basis.
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.
