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Average income rises with output growth but unemployment also rises. What is necessary in welfare analysis?

Answer and explanation

Correct answer: Examine employment distribution and income security rather than average income alone

Average income is an aggregate measure and can rise even when some people lose jobs or face insecure incomes. Welfare analysis must therefore examine how income and employment are distributed, whether households have income security, and whether growth is inclusive. Unemployment has social and economic costs but is not simply added to GDP. Option A is correct; options B, C, and D either misuse national accounts or ignore distributional effects.

Related tags

GdpWelfareUnemploymentInclusive GrowthAverage IncomeGdp And WelfareNational Income And Related AggregatesEconomics

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