Under which condition does a country with a small GDP have a large per capita income?

• A. When the government imposes high taxes
• B. When the country exports more than it imports
• C. When the country's population is very small
• D. When the country has a high level of income inequality

Answer: (C)

Verified step by step guidance

1. Understand that per capita income is calculated as the total GDP divided by the population size, expressed as \(\text{Per Capita Income} = \frac{\text{GDP}}{\text{Population}}\).
2. Recognize that a small GDP does not necessarily mean a low per capita income if the population is also very small, because dividing by a smaller number can result in a higher per capita income.
3. Analyze the other options: high taxes do not directly increase per capita income; exporting more than importing affects trade balance but not directly per capita income; high income inequality affects distribution but not the average per capita income calculation.
4. Conclude that the key condition for a country with a small GDP to have a large per capita income is having a very small population, as this increases the average income per person.
5. Summarize that per capita income depends on both GDP and population size, so a small population can lead to a high per capita income even if GDP is small.