Why are a rise in national income and a rise in real welfare not always the same in macroeconomics?
Answer and explanation
Correct answer: Because prices, distribution, the environment and non-market activities also matter
National income measures the money value of recorded economic production, but welfare is broader. A rise in income may be accompanied by greater inequality, pollution, congestion or stress. National accounts may also omit unpaid household work and leisure. Therefore, income growth alone cannot prove that real social welfare has improved.
Frequently asked questions
What is the correct answer to this question?
Because prices, distribution, the environment and non-market activities also matter
Why is this the correct answer?
National income measures the money value of recorded economic production, but welfare is broader. A rise in income may be accompanied by greater inequality, pollution, congestion or stress. National accounts may also omit unpaid household work and leisure. Therefore, income growth alone cannot prove that real social welfare has improved.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates.
