Why may GDP growth driven mainly by pollution cleanup and accident treatment not be considered welfare-enhancing growth?
Answer and explanation
Correct answer: Because they are activities compensating for earlier damage
Pollution cleanup, medical treatment after accidents, and similar defensive activities are genuine production, so their market value can enter GDP. However, they may mainly restore health, safety, or environmental quality lost through earlier damage rather than create an equivalent new improvement in net welfare. GDP records the spending but does not subtract the original loss automatically. Therefore C is the most accurate conclusion; A and B are factually wrong, and D is an unjustified generalization.
Frequently asked questions
What is the correct answer to this question?
Because they are activities compensating for earlier damage
Why is this the correct answer?
Pollution cleanup, medical treatment after accidents, and similar defensive activities are genuine production, so their market value can enter GDP. However, they may mainly restore health, safety, or environmental quality lost through earlier damage rather than create an equivalent new improvement in net welfare. GDP records the spending but does not subtract the original loss automatically. Therefore C is the most accurate conclusion; A and B are factually wrong, and D is an unjustified generalization.
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.
