Question

In: Economics

Identify whether there is likely an increase or decrease in measured Australian GDP in the following...

Identify whether there is likely an increase or decrease in measured Australian GDP in the following scenarios, and discuss whether GDP is a ‘good’ measure of progress in each case:

(i) a large increase in the proportion of young people volunteering (i.e. spending quality time, unpaid) with the elderly;

(ii) a sharp rise in traffic congestion and the frequency of vehicle accidents.

Solutions

Expert Solution

1.

The increase in unpaid spending time with the elderly people, is not going to increase the Australian GDP as these services are on a voluntary basis and unpaid. Here, people are sharing some of their own leisure time with the elderly people to make them happy and satisfying to themselves. It improves the quality of lives for elderly people as well as young people also, in the sense that they brought some happiness in others lives. So, it improves the happiness index of the country, though not record by the GDP of the country. So, it is the drawback of the GDP as a measure of progress in the country.

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2.

A sharp rise in traffic, means more number of cars or automobiles sold, making an indication that GDP has increased. But, it does not show the impact made by the increase in accidents. It means GDP does not consider the awareness among people towards safe and responsible driving, effective traffic control system and number of accidental deaths. It shows the lack of progress among the civil societies, that is not captured by GDP. So, it is again not a good measure of the progress other than measuring the output.

Rahul Sunny answered 1 year ago
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