If national income rises but income distribution remains very unequal, which limitation of macroeconomic analysis is shown?
Answer and explanation
Correct answer: An aggregate average does not fully reveal individual welfare
An increase in national income or average income does not prove that every person is better off. A large share of the additional income may go to a small group, while poorer households receive little benefit. Thus, aggregate measures can conceal inequality and cannot fully represent individual welfare. Option C is correct.
Frequently asked questions
What is the correct answer to this question?
An aggregate average does not fully reveal individual welfare
Why is this the correct answer?
An increase in national income or average income does not prove that every person is better off. A large share of the additional income may go to a small group, while poorer households receive little benefit. Thus, aggregate measures can conceal inequality and cannot fully represent individual welfare. Option C 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.
