Two countries have equal total GDP but one has highly unequal income distribution. Which conclusion is more likely?
Answer and explanation
Correct answer: Broad welfare may be lower in the more unequal country
The governing concept is that aggregate GDP measures the size of production but does not show how income and output are distributed. Two countries can have the same total GDP while one concentrates gains among a small group and leaves many people with lower living standards. Thus option D is the most appropriate conclusion. Options A and C treat GDP as complete welfare information, while B makes an unsupported universal claim.
Frequently asked questions
What is the correct answer to this question?
Broad welfare may be lower in the more unequal country
Why is this the correct answer?
The governing concept is that aggregate GDP measures the size of production but does not show how income and output are distributed. Two countries can have the same total GDP while one concentrates gains among a small group and leaves many people with lower living standards. Thus option D is the most appropriate conclusion. Options A and C treat GDP as complete welfare information, while B makes an unsupported universal claim.
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.
