In which example can GDP rise while social welfare may still decline?
Answer and explanation
Correct answer: Output of highly polluting factories increases
GDP records the market value of current final goods and services, but it does not fully deduct pollution, health damage, or loss of environmental quality. If polluting factories increase output, measured GDP can rise while illness, cleanup costs, and ecological damage reduce people’s welfare. Therefore, option B illustrates a limitation of GDP as a welfare measure.
Frequently asked questions
What is the correct answer to this question?
Output of highly polluting factories increases
Why is this the correct answer?
GDP records the market value of current final goods and services, but it does not fully deduct pollution, health damage, or loss of environmental quality. If polluting factories increase output, measured GDP can rise while illness, cleanup costs, and ecological damage reduce people’s welfare. Therefore, option B illustrates a limitation of GDP as a welfare measure.
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.
