QUESTION 75 (6 marks)
A factory subsidy is forecast to add $400 million to annual real output. A supplied environmental assessment estimates $150 million of annual community costs that are excluded from GDP. Evaluate the subsidy using sustainable development rather than output growth alone. The subsidy costs $300 million annually.
Practice marking scheme
Answer
Additional GDP alone cannot establish a net sustainable-development benefit.
Working
The factory adds measured production, but GDP omits the supplied $150 million environmental costs and does not measure distribution or the opportunity cost of public funds. The $300 million subsidy is a funding commitment, not itself proof of a $300 million net social loss: taxes/transfers and resource costs must be distinguished. Compare genuine additional social benefits, environmental costs, jobs and alternative uses of resources before concluding.
Marking criteria
- Uses both output and environmental evidence. [2 marks]
- Explains why GDP is an incomplete welfare measure. [2 marks]
- Evaluates funding/opportunity costs without mechanically treating a transfer as a resource loss. [2 marks]
Practice question aligned to the current QCAA syllabus; review the worked solution and marking criteria.
View the QCAA syllabusCompare your working with the guide above.