Question

Increases in GDP reflect increases in the well-being of a country. Articulate an argument for and against five of the following statements. Answers must be typed with 1.5 spacing. make as per Canadian education. 10 marks.

Answer 1

Arguments in Favor of GDP being a good measure of well being:

• It does measure production well. GDP is the sum total of final value of goods and services produced in a country during a particular period of time.
• It does indicate when a country is materially better or worse off in terms of jobs and incomes.
• In most countries, a significantly higher GDP per capita occurs hand in hand with other improvements in everyday life along many dimensions, like education, health, and environmental protection.
• Real GDP takes into account effects of inflation and deflation and gives an accurate picture of economic growth of a country. It is used as basis of comparison with other countries.
• GDP is also used as an indicator of a nation's overall standard of living because, generally, a nation's standard of living increases as GDP increases.

Arguments against GDP being a good measure of well being

• GDP does not account for leisure time. The US GDP per capita is larger than the GDP per capita of Germany, but does this prove that the standard of living in the United States is higher.US worker works several hundred hours more per year more than the average German worker. The calculation of GDP does not take German workers extra weeks of vacation into account.
• GDP includes production exchanged in market but dies nit include production not exchanged in market. Growing vegetables in your home garden for personal consumption is not counted in GDP as it is not sold in market.
• GDP does not speak about quality of life.Suppose people in a country have to get installed bars and bulgar alrams, due to increasing crine, this will increase GDP but it does not mean that people are made better off as they always have fear of crime.
• GDP includes what is spent on environmental protection, healthcare, and education, but it does not include actual levels of environmental cleanliness, health, and learning.
• GDP includes expenditure of healthcare but it does not specify whether infant morality rate or life expectancy has fallen or risen.
• GDP per capita is an average. It does not clarifies about level of inequality in society.When GDP per capita rises by 7%, it could mean that GDP for everyone in the society has risen by 7% or that the GDP of some groups has risen by more while the GDP of others has risen by less or even declined.

To conclude GDP is an indicator of society's well being but it is only a rough indicator. The standard of living does not measure the happiness and satisfaction of people as these things are not bought and sold in the market.