Average income rises with output growth but unemployment also rises. What is necessary in welfare analysis?
Answer and explanation
Correct answer: Examine employment distribution and income security rather than average income alone
Average income is an aggregate measure and can rise even when some people lose jobs or face insecure incomes. Welfare analysis must therefore examine how income and employment are distributed, whether households have income security, and whether growth is inclusive. Unemployment has social and economic costs but is not simply added to GDP. Option A is correct; options B, C, and D either misuse national accounts or ignore distributional effects.
Frequently asked questions
What is the correct answer to this question?
Examine employment distribution and income security rather than average income alone
Why is this the correct answer?
Average income is an aggregate measure and can rise even when some people lose jobs or face insecure incomes. Welfare analysis must therefore examine how income and employment are distributed, whether households have income security, and whether growth is inclusive. Unemployment has social and economic costs but is not simply added to GDP. Option A is correct; options B, C, and D either misuse national accounts or ignore distributional effects.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates. Topic: GDP and Welfare.
