How does income inequality affect the gross domestic product (GDP)?
1 Answer
Dec 19, 2014
It Doesn't.
Think of it like a model of an Economy that consists of 10 people and produced $1000 GDP of which $900 was produced by One person.
GDP per capita here is $100, while in fact 9 people received average of $11.11. the difference is a reference for Inequality.
Inequality is an expression of the distribution of that GDP, not a factor affecting it.
the other way around the GDP is very important to measure the Inequality by many ways. there are several methods to measure inequality.
you may further read about Gini index if Income Inequality is a subject of interest for you.
