Question

Discuss the likely impact of the construction of 20 new hospitals in a country on the Gross Domestic Product (GDP) and Welfare in the economy.

Hint:

Investment in infrastructure, such as hospitals, boosts both economic output (GDP) and social welfare by improving public services.

Answer 1

The construction of 20 new hospitals will have a significant impact on both GDP and welfare: 1. Impact on GDP:
The construction of new hospitals will contribute to GDP through the increase in investments (capital formation) in the economy. The construction process will generate demand for labor, materials, and services, thereby contributing to economic output. Furthermore, the hospitals will provide services that contribute to the economy's healthcare sector. The spending on hospital construction will increase gross fixed capital formation and thus increase GDP.
2. Impact on Welfare:
The construction of new hospitals will directly enhance the welfare of the population by improving access to healthcare services. This will lead to improved health outcomes, greater productivity, and a higher quality of life. Healthier individuals are more productive and can contribute more effectively to the economy. Thus, the construction of hospitals is beneficial not only for GDP but also for the long-term well-being of the population.
In conclusion, the construction of new hospitals contributes to both the immediate increase in GDP and the long-term improvement in societal welfare.