If the deflator falls while the quality of health and education services also declines, what can be said about welfare?
Answer and explanation
Correct answer: No definite conclusion can be drawn from the deflator alone
The GDP deflator measures the price level of domestically produced final goods and services; it is not a complete measure of welfare. A lower deflator may indicate slower price growth or falling prices, but it says nothing definite about service quality, access, distribution, health outcomes, or educational results. Since declining quality may reduce welfare while prices fall, the deflator alone cannot establish the direction of welfare. Thus option C is correct.
Frequently asked questions
What is the correct answer to this question?
No definite conclusion can be drawn from the deflator alone
Why is this the correct answer?
The GDP deflator measures the price level of domestically produced final goods and services; it is not a complete measure of welfare. A lower deflator may indicate slower price growth or falling prices, but it says nothing definite about service quality, access, distribution, health outcomes, or educational results. Since declining quality may reduce welfare while prices fall, the deflator alone cannot establish the direction of welfare. Thus option C is correct.
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.
