Income distribution in a country is so unequal that the top ten percent receives most income. What is the problem with relying only on per capita GDP?
Answer and explanation
Correct answer: It may hide the low income of the majority behind an average
Per capita GDP is calculated by dividing total GDP by population, so it is an arithmetic average rather than a description of how income is distributed. In a highly unequal country, a small high-income group can raise the average while most people have much lower incomes. Option B is correct. The measure does not understate total output, double-count population, or directly measure the general price level; distributional indicators are needed as well.
Frequently asked questions
What is the correct answer to this question?
It may hide the low income of the majority behind an average
Why is this the correct answer?
Per capita GDP is calculated by dividing total GDP by population, so it is an arithmetic average rather than a description of how income is distributed. In a highly unequal country, a small high-income group can raise the average while most people have much lower incomes. Option B is correct. The measure does not understate total output, double-count population, or directly measure the general price level; distributional indicators are needed as well.
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.
