Practicing Success
Read the following text and answer: There is an oil refinery which refines crude petroleum and sells it in the market. The output of the refinery is the amount of oil it refines. We can estimate the value added of the refinery by deducting the value of intermediate good used by the refinery from the value of its output. The value added of the refinery will be counted as part of the GDP of the economy. But in carrying out the production the refinery may also be polluting the nearby river. This may cause harm to the people who use the water of the river. Hence their well being will fall. Pollution may also kill fish or other organisms of the river on which fish survive. |
A rise in GDP will ____________
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reduce welfare always increase welfare may or may not increase welfare not affect welfare |
may or may not increase welfare |
Gross Domestic Product does not take into account changes in a nation's income distribution. Consequently, a gain in GDP may not always translate into an improvement in people's welfare. Thus, we can say that a rise in GDP may or may not increase welfare of the nation. |