If traffic congestion raises fuel consumption and vehicle-repair expenditure in a city, what is possible?
Answer and explanation
Correct answer: GDP may rise but welfare may fall due to time loss and pollution
Fuel purchases and paid vehicle repairs are market transactions, so their increased value can raise measured GDP. Yet congestion also creates unpaid time loss, stress, fuel waste and pollution, which are not fully deducted from GDP and can lower quality of life. Option C is correct because it recognizes both effects. A is too certain, while B and D ignore the recorded spending and welfare costs.
Frequently asked questions
What is the correct answer to this question?
GDP may rise but welfare may fall due to time loss and pollution
Why is this the correct answer?
Fuel purchases and paid vehicle repairs are market transactions, so their increased value can raise measured GDP. Yet congestion also creates unpaid time loss, stress, fuel waste and pollution, which are not fully deducted from GDP and can lower quality of life. Option C is correct because it recognizes both effects. A is too certain, while B and D ignore the recorded spending and welfare costs.
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.
