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Under which circumstance may the welfare of poor groups fall even when real GDP per capita rises?

Answer and explanation

Correct answer: When income gains go mainly to high-income groups and prices of necessities rise sharply for the poor

Real GDP per capita is an average, so it can rise without benefiting every group equally. If most additional income goes to high-income households while food, housing or other necessities become more expensive for poor households, their real purchasing power and living standard may decline. Distributional effects and group-specific costs are therefore essential in welfare analysis. Option A describes this situation.

Related tags

GdpWelfarePovertyInequalityGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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