If road accidents increase expenditure on vehicle repairs and medical services what may GDP show?
Answer and explanation
Correct answer: A rise in GDP but a possible fall in welfare
GDP measures the market value of final goods and services, not complete human welfare. Increased spending on repairs and medical treatment is recorded as current production, so GDP may rise. However, the accidents cause injury, suffering, property loss and defensive expenditure. Therefore, option C is correct; a higher GDP does not necessarily mean better welfare, while options A, B and D ignore this distinction.
Frequently asked questions
What is the correct answer to this question?
A rise in GDP but a possible fall in welfare
Why is this the correct answer?
GDP measures the market value of final goods and services, not complete human welfare. Increased spending on repairs and medical treatment is recorded as current production, so GDP may rise. However, the accidents cause injury, suffering, property loss and defensive expenditure. Therefore, option C is correct; a higher GDP does not necessarily mean better welfare, while options A, B and D ignore this distinction.
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.
