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In which situation will real GDP per capita remain a relatively good but incomplete indicator of welfare?

Answer and explanation

Correct answer: When prices are stable and there is no major change in distribution or environmental conditions

Real GDP per capita is most informative about material production when prices are reasonably stable and major non-market conditions do not change sharply. If income distribution and environmental quality remain broadly stable, changes in output per person provide a useful, though incomplete, indication of material welfare. Option D states these conditions. The other situations introduce pollution, reconstruction spending, or missing distributional information, which weakens the indicator.

Related tags

GdpWelfareReal GdpPer Capita IncomeWelfare IndicatorGdp And WelfareNational Income And Related AggregatesEconomics

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