Question

GDP is not a flawless measure of how well an economy is. Think of another measure that could be used (and it doesn't have to be necessarily strictly economic). Be sure to explain.

Answer 1

Gross Domestic Product ( GDP) is the sum total of all goods and services produced within the country. Often it is used as an indicator of growth projections of a country. However using the mere value of goods and services as a tool to measure growth alone does not give us an idea about how wealthy a country is. It focuses only on the quantifiable value of goods and services exchanged within a country in a given year and neglects how the money is divided within the country. There are other factors such as education, opportunities, health, etc. can also contribute to the country's economy. It neglects how sufficient a country is in terms of happiness, satisfaction of people which are those factors other than economic ones that contributes to the overall growth.

There are various other factors or indices that are used by organizations for obtaining better perspective of growth. One such is the Human Development Index (HDI) put forward by United Nations Development Programme can be considered as an alternative for GDP, which takes into account not just the economic growth but also the opportunities and capabilities of the people. Once proper education is provided, naturally the capabilities and opportunities of the people increases, health, lifestyle etc improves which eventually leads to the economic growth of the country. The indices used in HDI are Life Expectancy Index (LEI), Education Index (EI) and Income Index (II). This method provides a better way of analyzing the economy as compared to GDP.