What can be said about welfare if reconstruction after a natural disaster raises GDP?
Answer and explanation
Correct answer: GDP may rise while the disaster may have reduced welfare
GDP counts paid reconstruction activity because workers, materials, and construction services generate measured market output. However, the disaster may simultaneously destroy homes, assets, health, lives, and peace of mind. Therefore higher GDP does not prove higher welfare, making option D correct. The other choices confuse increased spending after damage with an improvement in overall well-being.
Frequently asked questions
What is the correct answer to this question?
GDP may rise while the disaster may have reduced welfare
Why is this the correct answer?
GDP counts paid reconstruction activity because workers, materials, and construction services generate measured market output. However, the disaster may simultaneously destroy homes, assets, health, lives, and peace of mind. Therefore higher GDP does not prove higher welfare, making option D correct. The other choices confuse increased spending after damage with an improvement in overall well-being.
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.
