Why may GDP rise when hospital and construction services increase after a natural disaster?
Answer and explanation
Correct answer: Because treatment and reconstruction are market services
The governing concept is that GDP records the market value of current final goods and services, not whether the spending arose from a beneficial event. Paid medical treatment and reconstruction generate market transactions and are therefore counted in GDP, so option D is correct. However, this does not mean welfare necessarily rises, because the disaster caused losses, suffering, and destruction that GDP may not fully show.
Frequently asked questions
What is the correct answer to this question?
Because treatment and reconstruction are market services
Why is this the correct answer?
The governing concept is that GDP records the market value of current final goods and services, not whether the spending arose from a beneficial event. Paid medical treatment and reconstruction generate market transactions and are therefore counted in GDP, so option D is correct. However, this does not mean welfare necessarily rises, because the disaster caused losses, suffering, and destruction that GDP may not fully show.
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.
