CSEET · Economic and Business Environment · National Income Accounting and Related Concepts
A country's per capita income rises sharply, yet a small group of households receives most of the additional income. Which limitation of national income as a welfare measure does this show?
Per capita national income is only an average and does not show how income is distributed. When gains go to a few households, the average rises while most people may not be better off, so it is a weak indicator of general welfare.
- AIt does not reveal the distribution of income among peopleCorrect
- BIt excludes all exports
- CIt counts only government spending
- DIt ignores the year of measurement
Explanation
Per capita income is an average and hides inequality. A rise in the average can coexist with unchanged or worsening welfare for most people. The other options misstate what national income covers.
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