Question

Suppose that country A has higher real income per capita than country B. Explain why this does not imply that most citizens of country A have higher real income than most citizens of country B.

A. A high degree of income inequality in country A may result in most of its citizens having incomes below the average income of country B.
B. The higher per capita income in country A could be the result of most citizens there having country B unearned income.
C. Most citizens in country B may be employed, while the majority of those in country A may not work.
D. All of the above are plausible.

Answer 1

A. A high degree of income inequality in country A may result in most of its citizens having incomes below the average income of country B.

Step-by-step explanation:

Real per capita income is an average of the incomes earned by the citizens of a country. It is used to gauge the standard of living in a country.

However in the given scenario country A has a higher real income per capita but a lower real income than country B.

This can be explained by a disparity in income of citizens in country A. If some people are very rich and others are very poor, an average may give large per capita income.

While in country B if there is income equality the personal income of each individual will be high.