Public health improves in a country but private medical spending falls. What may happen to GDP and welfare?
Answer and explanation
Correct answer: Welfare may rise while medical spending and part of GDP fall
GDP counts market expenditure on medical treatment, so fewer illnesses may reduce private medical spending and the related measured output. However, better public health can improve health, productivity, life expectancy and quality of life. Thus welfare may rise even when one category of expenditure and part of GDP decline. Option D is correct; the other choices assume an unjustified one-to-one link.
Frequently asked questions
What is the correct answer to this question?
Welfare may rise while medical spending and part of GDP fall
Why is this the correct answer?
GDP counts market expenditure on medical treatment, so fewer illnesses may reduce private medical spending and the related measured output. However, better public health can improve health, productivity, life expectancy and quality of life. Thus welfare may rise even when one category of expenditure and part of GDP decline. Option D is correct; the other choices assume an unjustified one-to-one link.
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.
