Which reason may cause economic welfare to fall despite an increase in real GDP?
Answer and explanation
Correct answer: Rising income inequality and environmental damage
Real GDP measures the market value of final goods and services produced, adjusted for prices, but it is not a complete measure of welfare. A rise in GDP can coexist with greater income inequality, pollution, resource depletion, congestion, or stress. If the gains are concentrated and environmental costs increase, many people may be worse off even though measured real output rises. Therefore option A is the valid reason.
Frequently asked questions
What is the correct answer to this question?
Rising income inequality and environmental damage
Why is this the correct answer?
Real GDP measures the market value of final goods and services produced, adjusted for prices, but it is not a complete measure of welfare. A rise in GDP can coexist with greater income inequality, pollution, resource depletion, congestion, or stress. If the gains are concentrated and environmental costs increase, many people may be worse off even though measured real output rises. Therefore option A is the valid reason.
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.
