In which situation may most households experience falling real income despite rising per capita GDP?
Answer and explanation
Correct answer: When income growth is concentrated in a very small high-income group
Per capita GDP is an average, so it can rise even when the majority does not gain. If a very small high-income group receives a disproportionately large increase, its additional output can raise the national average while other households face falling wages or purchasing power. C therefore illustrates inequality and the limitation of averages. Equal incomes, stable prices with rising employment, and better public services do not fit the stated mechanism.
Frequently asked questions
What is the correct answer to this question?
When income growth is concentrated in a very small high-income group
Why is this the correct answer?
Per capita GDP is an average, so it can rise even when the majority does not gain. If a very small high-income group receives a disproportionately large increase, its additional output can raise the national average while other households face falling wages or purchasing power. C therefore illustrates inequality and the limitation of averages. Equal incomes, stable prices with rising employment, and better public services do not fit the stated mechanism.
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.
