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Why may an increase in GDP not necessarily increase welfare?

Answer and explanation

Correct answer: Unequal distribution of income

GDP records the value of production, not how the resulting income is shared among people. If most additional income goes to a small group, the majority may receive little improvement in consumption or living conditions. Thus unequal distribution, option A, can prevent GDP growth from raising overall welfare. The other choices do not necessarily explain this limitation of GDP.

Related tags

GdpWelfareIncome DistributionNational IncomeGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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