Under which condition would real GDP per capita be a relatively better indicator of welfare?
Answer and explanation
Correct answer: When there are no major differences in income distribution, environment, and public services
Real GDP per capita is a limited welfare indicator because it adjusts for prices and population but does not fully measure inequality, environmental quality, leisure, or public services. It becomes relatively more useful for comparing countries when these non-income conditions are broadly similar. Therefore C is correct. A describes conditions that weaken the comparison, B ignores purchasing-power issues, and D substitutes nominal for real output.
Frequently asked questions
What is the correct answer to this question?
When there are no major differences in income distribution, environment, and public services
Why is this the correct answer?
Real GDP per capita is a limited welfare indicator because it adjusts for prices and population but does not fully measure inequality, environmental quality, leisure, or public services. It becomes relatively more useful for comparing countries when these non-income conditions are broadly similar. Therefore C is correct. A describes conditions that weaken the comparison, B ignores purchasing-power issues, and D substitutes nominal for real output.
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.
