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Question
"Gross Domestig Product (GDP) as an indicator of welfare loses its significance if the distribution of income turns unequal." Justify the given statement with valid reason.
Answer in Brief
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Solution
Yes, this is absolutely correct. A rise in GDP alone may not result in an increase in economic welfare. It is only significant when the distribution is equal. If it is not distributed equally, it will make the rich richer and the poor poorer. As a result, this indicator does not apply when the distribution is unequal.
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Gross and Net Domestic Product at Market Price
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