In which situation can GDP growth wrongly overstate growth in economic welfare?
Answer and explanation
Correct answer: When output rises by increasing pollution
GDP measures the value of marketed production, but it does not fully account for environmental damage, health costs, or the unequal distribution of benefits. If output rises because firms create more pollution, measured GDP may increase even while people suffer illness and reduced environmental quality. Thus, GDP growth can overstate welfare growth. Option A is the clearest example.
Frequently asked questions
What is the correct answer to this question?
When output rises by increasing pollution
Why is this the correct answer?
GDP measures the value of marketed production, but it does not fully account for environmental damage, health costs, or the unequal distribution of benefits. If output rises because firms create more pollution, measured GDP may increase even while people suffer illness and reduced environmental quality. Thus, GDP growth can overstate welfare growth. Option A is the clearest example.
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.
