When is the positive relationship between GDP and economic welfare most reliable?
Answer and explanation
Correct answer: When real output per capita rises and negative externalities are limited
GDP is most useful as a broad welfare signal when real production available per person increases, because this suggests greater average command over goods and services. The relationship is also more reliable when pollution, congestion, insecurity, and other negative externalities are limited and distribution is not severely unequal. Therefore option C provides the appropriate conditions. Options A, B, and D weaken the connection between aggregate output and actual welfare.
Frequently asked questions
What is the correct answer to this question?
When real output per capita rises and negative externalities are limited
Why is this the correct answer?
GDP is most useful as a broad welfare signal when real production available per person increases, because this suggests greater average command over goods and services. The relationship is also more reliable when pollution, congestion, insecurity, and other negative externalities are limited and distribution is not severely unequal. Therefore option C provides the appropriate conditions. Options A, B, and D weaken the connection between aggregate output and actual 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.
