If the quality of a government service improves while staff numbers and costs remain unchanged, what may real-output measurement do?
Answer and explanation
Correct answer: It may understate the quality improvement
When government output is measured mainly from inputs such as employee numbers or expenditure, unchanged inputs can make measured output appear unchanged. However, the service may have become more useful or effective because its quality improved. Unless the statistical system adjusts for that quality change, real output and productivity growth will be understated. Thus option A is correct; the other choices are not consequences of this measurement limitation.
Frequently asked questions
What is the correct answer to this question?
It may understate the quality improvement
Why is this the correct answer?
When government output is measured mainly from inputs such as employee numbers or expenditure, unchanged inputs can make measured output appear unchanged. However, the service may have become more useful or effective because its quality improved. Unless the statistical system adjusts for that quality change, real output and productivity growth will be understated. Thus option A is correct; the other choices are not consequences of this measurement limitation.
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.
