What is the biggest caution while using average income in macroeconomics?
Answer and explanation
Correct answer: Average income can hide inequality of distribution
Per-capita or average income is calculated by dividing total income by population. It gives a useful summary, but it does not show how income is distributed among people. A high average can coexist with severe inequality, poverty or exclusion, so distributional indicators must be examined alongside the average.
Frequently asked questions
What is the correct answer to this question?
Average income can hide inequality of distribution
Why is this the correct answer?
Per-capita or average income is calculated by dividing total income by population. It gives a useful summary, but it does not show how income is distributed among people. A high average can coexist with severe inequality, poverty or exclusion, so distributional indicators must be examined alongside the average.
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.
