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In which situation may most households experience falling real income despite rising per capita GDP?

Answer and explanation

Correct answer: When income growth is concentrated in a very small high-income group

Per capita GDP is an average, so it can rise even when the majority does not gain. If a very small high-income group receives a disproportionately large increase, its additional output can raise the national average while other households face falling wages or purchasing power. C therefore illustrates inequality and the limitation of averages. Equal incomes, stable prices with rising employment, and better public services do not fit the stated mechanism.

Related tags

Per Capita IncomeIncome InequalityAverage LimitationGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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