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If real GDP rises but income distribution becomes more unequal, what is the most appropriate conclusion about welfare?

Answer and explanation

Correct answer: Welfare change cannot be determined from GDP alone

The governing concept is the limitation of GDP as a welfare measure. Rising real GDP shows that inflation-adjusted output has increased, but it does not reveal who receives the additional income or whether distribution has worsened. Greater inequality may reduce the benefits reaching many households, while other welfare factors are also omitted. Therefore C is correct. A and B claim certainty without enough evidence, and D is wrong because real GDP remains a relevant, though incomplete, indicator.

Related tags

GdpWelfareIncome DistributionReal GdpInequalityGdp And WelfareNational Income And Related AggregatesEconomics

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