In an economy, weapons production rises while consumer-goods production falls and total GDP remains unchanged. What conclusion about welfare is appropriate?
Answer and explanation
Correct answer: Welfare may change because the composition of output changes, so GDP alone is insufficient
The relevant concept is the composition of output. GDP adds the market value of final goods and can remain constant even when the mix of goods changes. Weapons may contribute to measured GDP, but fewer consumer goods can reduce direct consumption benefits; the welfare effect also depends on security needs and social priorities. Therefore option C is the careful conclusion. Options A and B claim certainty, and D incorrectly excludes weapons from GDP.
Frequently asked questions
What is the correct answer to this question?
Welfare may change because the composition of output changes, so GDP alone is insufficient
Why is this the correct answer?
The relevant concept is the composition of output. GDP adds the market value of final goods and can remain constant even when the mix of goods changes. Weapons may contribute to measured GDP, but fewer consumer goods can reduce direct consumption benefits; the welfare effect also depends on security needs and social priorities. Therefore option C is the careful conclusion. Options A and B claim certainty, and D incorrectly excludes weapons from GDP.
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.
