If real GDP rises and income distribution becomes more equal what can generally be expected?
Answer and explanation
Correct answer: An increase in welfare
Real GDP measures the increase in output after removing the effect of price changes, so it indicates a greater quantity of goods and services. If income distribution simultaneously becomes more equal, the additional output is more likely to reach a larger share of the population. Consequently, average living conditions and welfare will generally improve, making A correct. This is a likely conclusion, not an absolute guarantee, because other social and environmental factors may matter.
Frequently asked questions
What is the correct answer to this question?
An increase in welfare
Why is this the correct answer?
Real GDP measures the increase in output after removing the effect of price changes, so it indicates a greater quantity of goods and services. If income distribution simultaneously becomes more equal, the additional output is more likely to reach a larger share of the population. Consequently, average living conditions and welfare will generally improve, making A correct. This is a likely conclusion, not an absolute guarantee, because other social and environmental factors may matter.
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.
