Why may an increase in GDP not necessarily increase welfare?
Answer and explanation
Correct answer: Unequal distribution of income
GDP records the value of production, not how the resulting income is shared among people. If most additional income goes to a small group, the majority may receive little improvement in consumption or living conditions. Thus unequal distribution, option A, can prevent GDP growth from raising overall welfare. The other choices do not necessarily explain this limitation of GDP.
Frequently asked questions
What is the correct answer to this question?
Unequal distribution of income
Why is this the correct answer?
GDP records the value of production, not how the resulting income is shared among people. If most additional income goes to a small group, the majority may receive little improvement in consumption or living conditions. Thus unequal distribution, option A, can prevent GDP growth from raising overall welfare. The other choices do not necessarily explain this limitation of 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.
