If a country’s GDP rises but income distribution becomes highly unequal, which statement about welfare is correct?
Answer and explanation
Correct answer: Welfare cannot be concluded from GDP alone
An increase in GDP indicates that the total value of measured production has risen, but it does not show how income and consumption opportunities are distributed among people. If the gains go mainly to a small group, many citizens may experience little improvement. Welfare assessment therefore also requires information about inequality, poverty, health, education, leisure, and environmental quality.
Frequently asked questions
What is the correct answer to this question?
Welfare cannot be concluded from GDP alone
Why is this the correct answer?
An increase in GDP indicates that the total value of measured production has risen, but it does not show how income and consumption opportunities are distributed among people. If the gains go mainly to a small group, many citizens may experience little improvement. Welfare assessment therefore also requires information about inequality, poverty, health, education, leisure, and environmental quality.
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.
