Two countries have equal real GDP per capita but the first has much greater income inequality. Which statement about welfare comparison is correct?
Answer and explanation
Correct answer: Welfare cannot be determined conclusively from GDP alone
Real GDP per capita is an average: it divides total real output by population but does not reveal how income or resources are distributed. Two countries with the same average can therefore have very different poverty, access to services, and living conditions. Greater inequality does not automatically prove either higher or lower welfare, so GDP alone cannot settle the comparison. Option B is correct.
Frequently asked questions
What is the correct answer to this question?
Welfare cannot be determined conclusively from GDP alone
Why is this the correct answer?
Real GDP per capita is an average: it divides total real output by population but does not reveal how income or resources are distributed. Two countries with the same average can therefore have very different poverty, access to services, and living conditions. Greater inequality does not automatically prove either higher or lower welfare, so GDP alone cannot settle the comparison. Option B is correct.
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.
