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If GDP rises but most of the additional income goes to a few people, what may happen to welfare?

Answer and explanation

Correct answer: Welfare may not rise equally

GDP is an aggregate measure, so it can increase even when the gains from production are concentrated among a small group. If the majority receives little additional income, access to food, health care, education, and other benefits may not improve proportionately. Consequently, welfare need not rise equally with GDP. Option A is correct; inequality does not make everyone’s income equal, eliminate poverty automatically, or reduce GDP to zero.

Related tags

Income DistributionInequalityGdp GrowthWelfareGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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