Why should GDP growth driven mainly by accident treatment and pollution cleanup not be treated as complete welfare growth?
Answer and explanation
Correct answer: Because they are activities compensating for earlier damage
GDP counts paid medical and cleanup services as production, so these activities can raise measured GDP. The welfare interpretation is different: much of this spending repairs harm that has already reduced safety, health or environmental quality rather than creating an equivalent new benefit. Option C is correct. A and B are false because the services are production with market value, while D is an unjustified generalisation.
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?
GDP counts paid medical and cleanup services as production, so these activities can raise measured GDP. The welfare interpretation is different: much of this spending repairs harm that has already reduced safety, health or environmental quality rather than creating an equivalent new benefit. Option C is correct. A and B are false because the services are production with market value, while D is an unjustified generalisation.
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.
