If real GDP rises but income inequality increases sharply what is the most appropriate conclusion about welfare?
Answer and explanation
Correct answer: Benefits of GDP growth may remain limited to certain groups
The governing concept is the limitation of GDP as a welfare indicator. Real GDP measures inflation-adjusted output, but it does not show how income and gains are distributed. If inequality rises sharply, the additional output may benefit mainly higher-income groups, so option B is the appropriate conclusion. Option A and C wrongly assume equality, while option D incorrectly dismisses the relevance of per capita income.
Frequently asked questions
What is the correct answer to this question?
Benefits of GDP growth may remain limited to certain groups
Why is this the correct answer?
The governing concept is the limitation of GDP as a welfare indicator. Real GDP measures inflation-adjusted output, but it does not show how income and gains are distributed. If inequality rises sharply, the additional output may benefit mainly higher-income groups, so option B is the appropriate conclusion. Option A and C wrongly assume equality, while option D incorrectly dismisses the relevance of per capita income.
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.
