If workplace accidents and medical spending both rise, how may GDP give a misleading picture of welfare?
Answer and explanation
Correct answer: Treatment spending raises output but does not deduct the loss caused by accidents
GDP records the market value of medical treatment, so increased spending on doctors, medicines, and hospital services may raise measured output. However, GDP does not fully subtract pain, disability, lost quality of life, or the social loss caused by accidents. This defensive expenditure can therefore make GDP rise while welfare falls. Option C states this limitation accurately; the other choices are false.
Frequently asked questions
What is the correct answer to this question?
Treatment spending raises output but does not deduct the loss caused by accidents
Why is this the correct answer?
GDP records the market value of medical treatment, so increased spending on doctors, medicines, and hospital services may raise measured output. However, GDP does not fully subtract pain, disability, lost quality of life, or the social loss caused by accidents. This defensive expenditure can therefore make GDP rise while welfare falls. Option C states this limitation accurately; the other choices are false.
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.
