In which situation will real GDP per capita remain a relatively good but incomplete indicator of welfare?
Answer and explanation
Correct answer: When prices are stable and there is no major change in distribution or environmental conditions
Real GDP per capita is most informative about material production when prices are reasonably stable and major non-market conditions do not change sharply. If income distribution and environmental quality remain broadly stable, changes in output per person provide a useful, though incomplete, indication of material welfare. Option D states these conditions. The other situations introduce pollution, reconstruction spending, or missing distributional information, which weakens the indicator.
Frequently asked questions
What is the correct answer to this question?
When prices are stable and there is no major change in distribution or environmental conditions
Why is this the correct answer?
Real GDP per capita is most informative about material production when prices are reasonably stable and major non-market conditions do not change sharply. If income distribution and environmental quality remain broadly stable, changes in output per person provide a useful, though incomplete, indication of material welfare. Option D states these conditions. The other situations introduce pollution, reconstruction spending, or missing distributional information, which weakens the indicator.
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.
