Which change can reduce measured economic welfare without reducing GDP?
Answer and explanation
Correct answer: Increase in pollution
GDP measures the market value of final goods and services, but it does not fully subtract environmental damage or other negative externalities. Therefore, a rise in pollution can lower people’s health, comfort, and life satisfaction even when recorded production and GDP remain unchanged. More leisure, literacy, and equality generally support welfare rather than reduce it.
Frequently asked questions
What is the correct answer to this question?
Increase in pollution
Why is this the correct answer?
GDP measures the market value of final goods and services, but it does not fully subtract environmental damage or other negative externalities. Therefore, a rise in pollution can lower people’s health, comfort, and life satisfaction even when recorded production and GDP remain unchanged. More leisure, literacy, and equality generally support welfare rather than reduce it.
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.
