Identify the scenario which would lead to an increase in GDP, but might not necessarily improve overall welfare?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Expansion of environmentally harmful industries.
An increase in GDP means more goods and services are being produced in an economy. However, GDP only measures economic output, not the quality of life or well-being of people.Expansion of environmentally harmful industries can raise GDP because production increases, but it may harm health, deplete natural resources, and damage ecosystems, thus reducing overall welfare.
In contrast:
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Reduction in income inequality improves welfare.
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Growth of infrastructure often boosts both GDP and welfare.
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Investment in education and healthcare directly enhances well-being and long-term development.