Why is it necessary to understand the limitation of average indicators in macroeconomics?
Answer and explanation
Correct answer: Because averages can hide inequality and distribution
An average, such as per capita income, is calculated by dividing an aggregate by the number of people. It may rise even when most people receive little benefit, because a small group can capture a large share of income. Thus, averages do not fully reveal inequality, poverty, or distribution. Option A correctly states this limitation and relates to GDP and welfare.
Frequently asked questions
What is the correct answer to this question?
Because averages can hide inequality and distribution
Why is this the correct answer?
An average, such as per capita income, is calculated by dividing an aggregate by the number of people. It may rise even when most people receive little benefit, because a small group can capture a large share of income. Thus, averages do not fully reveal inequality, poverty, or distribution. Option A correctly states this limitation and relates to GDP and welfare.
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.
