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Why may the average citizen's consumption capacity fall despite an increase in real GDP?

Answer and explanation

Correct answer: If population grows faster or a large income share goes to a few people

Total real GDP measures the size of real output, not the amount available to each citizen. If population grows faster than real GDP, real GDP per capita falls; similarly, greater concentration of income can reduce the consumption capacity of the average or poorer citizen even when the total rises. Option A states both mechanisms. The other choices do not necessarily reduce individual purchasing capacity.

Related tags

Consumption CapacityPopulationIncome DistributionReal Gdp Per CapitaGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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