Under which circumstance may the welfare of poor groups fall even when real GDP per capita rises?
Answer and explanation
Correct answer: When income gains go mainly to high-income groups and prices of necessities rise sharply for the poor
Real GDP per capita is an average, so it can rise without benefiting every group equally. If most additional income goes to high-income households while food, housing or other necessities become more expensive for poor households, their real purchasing power and living standard may decline. Distributional effects and group-specific costs are therefore essential in welfare analysis. Option A describes this situation.
Frequently asked questions
What is the correct answer to this question?
When income gains go mainly to high-income groups and prices of necessities rise sharply for the poor
Why is this the correct answer?
Real GDP per capita is an average, so it can rise without benefiting every group equally. If most additional income goes to high-income households while food, housing or other necessities become more expensive for poor households, their real purchasing power and living standard may decline. Distributional effects and group-specific costs are therefore essential in welfare analysis. Option A describes this situation.
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.
