What would be useful to deduct from GDP while measuring net economic welfare?
Answer and explanation
Correct answer: Costs of pollution and congestion
GDP records market production, but production and consumption can impose external costs on society. Pollution damages health and ecosystems, while congestion wastes time, fuel, and productivity. If the aim is net economic welfare, such negative effects should be deducted from the measured benefit of output, whereas education, health improvements, and leisure are positive welfare components that should not be treated as deductions. Hence option B is correct.
Frequently asked questions
What is the correct answer to this question?
Costs of pollution and congestion
Why is this the correct answer?
GDP records market production, but production and consumption can impose external costs on society. Pollution damages health and ecosystems, while congestion wastes time, fuel, and productivity. If the aim is net economic welfare, such negative effects should be deducted from the measured benefit of output, whereas education, health improvements, and leisure are positive welfare components that should not be treated as deductions. Hence option B is correct.
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.
