If spending on security services rises because crime increases what relationship may exist between GDP and welfare?
Answer and explanation
Correct answer: GDP may rise while welfare falls
GDP records the market value of currently produced security services, so higher spending on guards, alarms, or police services can raise measured GDP. However, the rise in crime creates fear, insecurity, property losses, and defensive costs that may reduce people’s well-being. Therefore, option A is correct. Option B is too certain, C is false because market security services are included, and D has no economic basis.
Frequently asked questions
What is the correct answer to this question?
GDP may rise while welfare falls
Why is this the correct answer?
GDP records the market value of currently produced security services, so higher spending on guards, alarms, or police services can raise measured GDP. However, the rise in crime creates fear, insecurity, property losses, and defensive costs that may reduce people’s well-being. Therefore, option A is correct. Option B is too certain, C is false because market security services are included, and D has no economic 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.
