Which aspect represents a welfare limitation of NNP?
Answer and explanation
Correct answer: It does not fully show income distribution
NNP measures the net value of goods and services produced, but it does not show how that income is distributed among households. Two countries may have the same NNP while one has relatively equal distribution and the other has severe inequality. Welfare analysis therefore requires distribution and other non-market factors in addition to NNP.
Frequently asked questions
What is the correct answer to this question?
It does not fully show income distribution
Why is this the correct answer?
NNP measures the net value of goods and services produced, but it does not show how that income is distributed among households. Two countries may have the same NNP while one has relatively equal distribution and the other has severe inequality. Welfare analysis therefore requires distribution and other non-market factors in addition to NNP.
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.
