Question

Which of the following statements is correct with respect to the relation between per capita income, national income, and the population of a country?

• A. Per capita income increases only when the rate of growth of national income is equal to the rate of growth of population.
• B. Per capita income increases only when the rate of growth of national income is more than the rate of growth of population.
• C. Per capita income increases only when the rate of growth of national income is less than the rate of growth of population.
• D. National income and population of a country do not impact per capita income.

Answer 1

The correct option is B Per capita income increases only when the rate of growth of national income is more than the rate of growth of population.

Per capita income is obtained by dividing the total income of the country by the its population. Therefore, if the rate of population growth is higher, per capita income decreases. It increases only when the rate of growth of national income is more than the rate of growth of the population.