Question

Consider the following statements:

1. The use of public parks increases welfare

2. The distribution of GDP increases welfare

3. Higher GDP always causes higher welfare

Which of the above statements are false?

Options

• Only 1

• Only 2

• Only 3

• 1 and 3

Answer 1

Only 3

Explanation:

In general, Real GDP and Welfare are inextricably linked. A higher GDP implies more goods and services produced. It means more goods and services are available. However, more goods and services do not always imply that people were better off during the year. In other words, a higher GDP does not always imply greater human welfare.