If GDP rises but income becomes concentrated among only a few people, which limitation of GDP is illustrated?
Answer and explanation
Correct answer: GDP ignores income distribution
GDP is an aggregate measure of the value of production or income generated in an economy. It does not show how that income is distributed among households or groups. Therefore, GDP can increase while most people receive little or no benefit if gains are concentrated among a small group. Measures such as inequality indicators, poverty rates, and per-capita distribution are needed to assess welfare more fully. Option A is correct.
Frequently asked questions
What is the correct answer to this question?
GDP ignores income distribution
Why is this the correct answer?
GDP is an aggregate measure of the value of production or income generated in an economy. It does not show how that income is distributed among households or groups. Therefore, GDP can increase while most people receive little or no benefit if gains are concentrated among a small group. Measures such as inequality indicators, poverty rates, and per-capita distribution are needed to assess welfare more fully. Option A is correct.
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.
