The government spends more on crime control because crime has increased. What is the most appropriate analysis of GDP and welfare?
Answer and explanation
Correct answer: GDP may rise, but welfare may fall because crime has increased
Government purchases of crime-control services can count as current production and therefore raise measured GDP. However, the increased crime that caused the spending imposes fear, loss, and reduced quality of life, none of which is fully captured by GDP. Option B correctly separates recorded expenditure from the underlying social harm. C is false because qualifying government expenditure is included; A and D assume every expenditure improves welfare.
Frequently asked questions
What is the correct answer to this question?
GDP may rise, but welfare may fall because crime has increased
Why is this the correct answer?
Government purchases of crime-control services can count as current production and therefore raise measured GDP. However, the increased crime that caused the spending imposes fear, loss, and reduced quality of life, none of which is fully captured by GDP. Option B correctly separates recorded expenditure from the underlying social harm. C is false because qualifying government expenditure is included; A and D assume every expenditure improves welfare.
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.
