In which situation may GDP rise while welfare falls?
Answer and explanation
Correct answer: When polluting production increases
A central welfare principle is that an increase in measured production can create negative externalities. If polluting factories produce and sell more goods, the value of that output may raise GDP, but polluted air or water can damage health and reduce quality of life. Option D is therefore correct. Clean water, more schools, and vaccination generally improve welfare, although their full benefits may not all appear in GDP.
Frequently asked questions
What is the correct answer to this question?
When polluting production increases
Why is this the correct answer?
A central welfare principle is that an increase in measured production can create negative externalities. If polluting factories produce and sell more goods, the value of that output may raise GDP, but polluted air or water can damage health and reduce quality of life. Option D is therefore correct. Clean water, more schools, and vaccination generally improve welfare, although their full benefits may not all appear in 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.
