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Why is it necessary to understand the limitation of average indicators in macroeconomics?

Answer and explanation

Correct answer: Because averages can hide inequality and distribution

An average, such as per capita income, is calculated by dividing an aggregate by the number of people. It may rise even when most people receive little benefit, because a small group can capture a large share of income. Thus, averages do not fully reveal inequality, poverty, or distribution. Option A correctly states this limitation and relates to GDP and welfare.

Related tags

Average-IndicatorsPer-Capita-IncomeInequalityGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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