Why may the average citizen's consumption capacity fall despite an increase in real GDP?
Answer and explanation
Correct answer: If population grows faster or a large income share goes to a few people
Total real GDP measures the size of real output, not the amount available to each citizen. If population grows faster than real GDP, real GDP per capita falls; similarly, greater concentration of income can reduce the consumption capacity of the average or poorer citizen even when the total rises. Option A states both mechanisms. The other choices do not necessarily reduce individual purchasing capacity.
Frequently asked questions
What is the correct answer to this question?
If population grows faster or a large income share goes to a few people
Why is this the correct answer?
Total real GDP measures the size of real output, not the amount available to each citizen. If population grows faster than real GDP, real GDP per capita falls; similarly, greater concentration of income can reduce the consumption capacity of the average or poorer citizen even when the total rises. Option A states both mechanisms. The other choices do not necessarily reduce individual purchasing capacity.
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.
