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If a country's real GDP rises but a large share of income goes only to the top-income group what is the most appropriate conclusion?

Answer and explanation

Correct answer: Broad public welfare will not necessarily rise

The governing concept is the distinction between economic growth and broad welfare. Real GDP measures the inflation-adjusted value of production, but it does not show how income is distributed among households. If most additional income goes to the top group, average output may rise while many people experience little improvement in purchasing power or living conditions. Therefore broad welfare will not necessarily rise. Equal income growth and automatic elimination of poverty do not follow from GDP growth alone.

Related tags

Real GdpIncome ConcentrationBroad WelfareGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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