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

Answer and explanation

Correct answer: Welfare cannot be determined from GDP alone

The governing economic concept is the limitation of GDP as a welfare indicator. Real GDP measures inflation-adjusted production or average real income, but it does not show who receives that income, nor does it fully capture health, leisure, environmental quality, or security. Hence option C is correct: higher GDP may coexist with unequal gains, so welfare cannot be determined from GDP alone. Option A is too certain, B is not necessarily true, and D wrongly denies any relationship.

Related tags

GdpWelfareIncome-DistributionReal-GdpGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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