If GDP rises but most of the additional income goes to a few people, what may happen to welfare?
Answer and explanation
Correct answer: Welfare may not rise equally
GDP is an aggregate measure, so it can increase even when the gains from production are concentrated among a small group. If the majority receives little additional income, access to food, health care, education, and other benefits may not improve proportionately. Consequently, welfare need not rise equally with GDP. Option A is correct; inequality does not make everyone’s income equal, eliminate poverty automatically, or reduce GDP to zero.
Frequently asked questions
What is the correct answer to this question?
Welfare may not rise equally
Why is this the correct answer?
GDP is an aggregate measure, so it can increase even when the gains from production are concentrated among a small group. If the majority receives little additional income, access to food, health care, education, and other benefits may not improve proportionately. Consequently, welfare need not rise equally with GDP. Option A is correct; inequality does not make everyone’s income equal, eliminate poverty automatically, or reduce GDP to zero.
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.
