Why is real GDP per capita an incomplete indicator of living standards?
Answer and explanation
Correct answer: It does not fully reflect income distribution, non-market services, the environment and leisure
Real GDP removes the effect of price changes, and dividing it by population gives average real market output per person. However, living standards also depend on income distribution, unpaid household work, public and non-market services, environmental quality, health, security and leisure. Option B is correct because these dimensions are not fully captured; option A contradicts the meaning of real GDP.
Frequently asked questions
What is the correct answer to this question?
It does not fully reflect income distribution, non-market services, the environment and leisure
Why is this the correct answer?
Real GDP removes the effect of price changes, and dividing it by population gives average real market output per person. However, living standards also depend on income distribution, unpaid household work, public and non-market services, environmental quality, health, security and leisure. Option B is correct because these dimensions are not fully captured; option A contradicts the meaning of real GDP.
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.
