If two countries have equal NNP_FC but different populations, what should be done in a welfare comparison?
Answer and explanation
Correct answer: Per capita NNP_FC should also be checked
Total NNP_FC shows the aggregate income of normal residents, but it does not show how much income is available on average for each person. When populations differ, equal total NNP can imply very different average incomes and access to goods and services. Per capita NNP_FC, calculated as total NNP_FC divided by population, is therefore an important additional indicator, although welfare also depends on distribution and non-monetary factors.
Frequently asked questions
What is the correct answer to this question?
Per capita NNP_FC should also be checked
Why is this the correct answer?
Total NNP_FC shows the aggregate income of normal residents, but it does not show how much income is available on average for each person. When populations differ, equal total NNP can imply very different average incomes and access to goods and services. Per capita NNP_FC, calculated as total NNP_FC divided by population, is therefore an important additional indicator, although welfare also depends on distribution and non-monetary factors.
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.
