If traffic congestion increases fuel use and vehicle repairs what may GDP show?
Answer and explanation
Correct answer: Market spending may rise while time and environmental welfare decline
The governing concept is that GDP measures market production and expenditure, not every cost or benefit affecting welfare. Congestion can increase sales of fuel and repair services, which may raise recorded GDP. At the same time, commuters lose time and pollution may worsen, reducing social and environmental welfare. Therefore option C is correct; the other options either overstate or misunderstand GDP accounting.
Frequently asked questions
What is the correct answer to this question?
Market spending may rise while time and environmental welfare decline
Why is this the correct answer?
The governing concept is that GDP measures market production and expenditure, not every cost or benefit affecting welfare. Congestion can increase sales of fuel and repair services, which may raise recorded GDP. At the same time, commuters lose time and pollution may worsen, reducing social and environmental welfare. Therefore option C is correct; the other options either overstate or misunderstand GDP accounting.
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.
