Why does GDP per capita become a weak welfare indicator when a large share of national income goes to a few individuals?
Answer and explanation
Correct answer: Because it is an average and hides distribution
GDP per capita is calculated as total GDP divided by population, so it is an arithmetic average rather than a description of each person’s income or consumption. A high average can coexist with poverty if most income is concentrated among a small group. Thus option A is correct. It does not measure only exports, it is based on real or nominal output as specified, and population is used as a divisor, not multiplied.
Frequently asked questions
What is the correct answer to this question?
Because it is an average and hides distribution
Why is this the correct answer?
GDP per capita is calculated as total GDP divided by population, so it is an arithmetic average rather than a description of each person’s income or consumption. A high average can coexist with poverty if most income is concentrated among a small group. Thus option A is correct. It does not measure only exports, it is based on real or nominal output as specified, and population is used as a divisor, not multiplied.
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.
