Hi there,

Both scores will be taken into account (not an average). But they won't solely base your academics on this. You will need to write the GMAT or GRE to be admitted to most business schools. The Gmat score is weighed the most and can definitely compensate for a lower GPA. So if you have a lower gpa then you would really want to achieve a high gmat score to compensate.
Yes of course it will always be beneficial to raise your master's gpa if you can (for many reasons - business school and job search) so go for it! Keep in mind extra curriculars are also very important for a lot of schools so try and get engaged in school activities/clubs, volunteer work and other hobbies.

Good luck
Melissa