If the quantity of goods rises but their quality falls sharply, what problem arises in relating GDP to welfare?
Answer and explanation
Correct answer: Quantitative growth may overstate the rise in actual satisfaction
GDP primarily records the market value of measured production, and a rise in quantity can make output appear larger. If quality deteriorates substantially, however, consumers may receive less satisfaction, durability or usefulness from those goods. The quantitative GDP increase may therefore exaggerate the improvement in welfare. C is correct; A, B and D make absolute claims that do not follow from the concept.
Frequently asked questions
What is the correct answer to this question?
Quantitative growth may overstate the rise in actual satisfaction
Why is this the correct answer?
GDP primarily records the market value of measured production, and a rise in quantity can make output appear larger. If quality deteriorates substantially, however, consumers may receive less satisfaction, durability or usefulness from those goods. The quantitative GDP increase may therefore exaggerate the improvement in welfare. C is correct; A, B and D make absolute claims that do not follow from the concept.
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.
