In which situation may GDP rise without necessarily raising social welfare?
Answer and explanation
Correct answer: Excessive spending on weapons
GDP measures the value of production and spending, not whether every component of output improves social welfare. Excessive weapons expenditure can increase production, employment, and recorded market value, so GDP may rise. However, it may not improve ordinary living conditions and can divert resources from education, health, housing, or other peaceful needs. Therefore option D is correct; schools, clean water, and employment generally have more direct welfare benefits.
Frequently asked questions
What is the correct answer to this question?
Excessive spending on weapons
Why is this the correct answer?
GDP measures the value of production and spending, not whether every component of output improves social welfare. Excessive weapons expenditure can increase production, employment, and recorded market value, so GDP may rise. However, it may not improve ordinary living conditions and can divert resources from education, health, housing, or other peaceful needs. Therefore option D is correct; schools, clean water, and employment generally have more direct welfare benefits.
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.
