Explain how distribution of gross domestic product is its limitation as a measure of economic welfare.

Open in App

Solution

It is not only the quantum of GDP which affects economic welfare but also the pattern of the distribution of GDP. If GDP is distributed in a manner which increases income-inequalities, it will adversely affect economic welfare. This is so because the utility of income is more for the poor than for the rich.

Suggest Corrections

Similar questions

Explain how the gross domestic product has its limitations as a measure of economic welfare.

Explain 'non-monetary exchanges' as a limitation of using gross domestic product as an index of welfare of a country.

How can externalities be a limitation of using Gross Domestic Product as an index of welfare?

Join BYJU'S Learning Program