Two sovereign nations report identical figures for Real Gross Domestic Product (GDP) per capita. However, the majority of citizens in Country A enjoy noticeably higher welfare and living standards than those in Country B. Which of the following economic factors best accounts for this limitation in using national income data to compare living standards?
- ACountry A experienced a surge in general price levels, which expanded the nominal value of national output.
- BCountry A included the value of both raw agricultural inputs and final food products in its national product calculation.
- Country A has a more equitable distribution of income, ensuring national wealth is widely shared among the population.Answer
- DCountry A achieved a higher annual rate of GDP growth, which automatically guarantees greater economic development.
Answer
Country A has a more equitable distribution of income, ensuring national wealth is widely shared among the population.
Per capita national income is an aggregate average that does not reveal how income is distributed across households. If two countries have the same real GDP per capita, the nation with a more equal distribution of income will experience higher widespread living standards and lower poverty levels compared to a nation where income is highly concentrated.
Step-by-Step Solution
Key Concept
Limitations of National Income Estimates in Welfare Measurement
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