Which expenditure may be called defensive expenditure?
Answer and explanation
Correct answer: Spending to clean damage caused by pollution
Defensive expenditure is spending undertaken to protect people from, or repair the harm caused by, undesirable conditions such as pollution. Money spent cleaning pollution damage may increase measured GDP because the cleanup service is counted, even though it restores welfare lost through environmental harm. Therefore, option D is correct. Schools, libraries and clean-water projects are generally developmental or welfare-enhancing investments rather than defensive responses to prior damage.
Frequently asked questions
What is the correct answer to this question?
Spending to clean damage caused by pollution
Why is this the correct answer?
Defensive expenditure is spending undertaken to protect people from, or repair the harm caused by, undesirable conditions such as pollution. Money spent cleaning pollution damage may increase measured GDP because the cleanup service is counted, even though it restores welfare lost through environmental harm. Therefore, option D is correct. Schools, libraries and clean-water projects are generally developmental or welfare-enhancing investments rather than defensive responses to prior damage.
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.
