Which of the following is counted in GDP but does not necessarily increase welfare?
Answer and explanation
Correct answer: Market expenditure on cleaning pollution
GDP records market-valued production and expenditure, not every improvement in people’s well-being. Expenditure on cleaning pollution is paid market activity and therefore adds to measured output. However, it may merely repair damage created earlier, so the increase in GDP does not necessarily mean that people are better off overall. Unpaid cooking, free help and leisure are normally outside measured GDP.
Frequently asked questions
What is the correct answer to this question?
Market expenditure on cleaning pollution
Why is this the correct answer?
GDP records market-valued production and expenditure, not every improvement in people’s well-being. Expenditure on cleaning pollution is paid market activity and therefore adds to measured output. However, it may merely repair damage created earlier, so the increase in GDP does not necessarily mean that people are better off overall. Unpaid cooking, free help and leisure are normally outside measured GDP.
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.
