Why can income inequality be hidden in GDP?
Answer and explanation
Correct answer: Because GDP shows total output, not individual distribution
GDP is an aggregate measure of the value of final goods and services produced in an economy. It indicates the total size or income-generating capacity of the economy, but it does not reveal who receives that income or how evenly it is distributed. Two countries can have the same GDP or GDP per capita while having very different inequality levels. Distributional measures, such as income shares or the Gini coefficient, are needed to study inequality.
Frequently asked questions
What is the correct answer to this question?
Because GDP shows total output, not individual distribution
Why is this the correct answer?
GDP is an aggregate measure of the value of final goods and services produced in an economy. It indicates the total size or income-generating capacity of the economy, but it does not reveal who receives that income or how evenly it is distributed. Two countries can have the same GDP or GDP per capita while having very different inequality levels. Distributional measures, such as income shares or the Gini coefficient, are needed to study inequality.
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.
