If the GDP of a country is rising, what will be its effect on welfare ?

Welfare of entire country may not increase

The correct answer is option (3) : Welfare of entire country may not increase

The relationship between GDP growth and overall welfare is not straightforward. While GDP is a measure of the economic output and income of a country, it doesn't necessarily capture the distribution of that income or the well-being of all individuals. If the GDP of the country is rising, the welfare may not rise as a consequence.

Several factors contribute to the complexity of this relationship :

1. Income Inequality:GDP growth may not benefit all segments of the population equally. If income is concentrated among a few, the overall welfare may not increase for the entire country.

2. Quality of Life: GDP does not account for factors like health, education, and environmental quality. An increase in GDP may not necessarily lead to improvements in these aspects of well-being.

3. Externalities:Economic growth may bring about negative externalities such as environmental degradation, which can impact overall welfare.

4. Distribution of Resources:The way the additional income generated by GDP growth is distributed among various sectors and regions can affect overall welfare.

Therefore, while GDP growth is often associated with improved standards of living, it does not guarantee an increase in overall welfare for the entire country, as it depends on how the benefits are distributed and whether non-economic factors are considered.