Two economies have equal per-capita GDP but one has greater income inequality. Which may generally have higher broad welfare?
Answer and explanation
Correct answer: In the less unequal economy
The governing concept is that per-capita GDP is only an average; it does not show how income is distributed. If two economies have the same average output but one is less unequal, a larger share of people is more likely to access income and basic goods, so broad welfare may be higher there. Option D is correct. The conclusion is general, not an absolute guarantee, because health and other factors also matter.
Frequently asked questions
What is the correct answer to this question?
In the less unequal economy
Why is this the correct answer?
The governing concept is that per-capita GDP is only an average; it does not show how income is distributed. If two economies have the same average output but one is less unequal, a larger share of people is more likely to access income and basic goods, so broad welfare may be higher there. Option D is correct. The conclusion is general, not an absolute guarantee, because health and other factors also matter.
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.
