Question

In: Economics

Why is it desirable for a country to have a large GDP? Will having a large...

Why is it desirable for a country to have a large GDP? Will having a large GDP in a country solve the problem of equity. Why and why not?

Solutions

Expert Solution

Large GDP are desirable for a country because GDP measures not only the value of final goods and services in the economy, but also the income of the economy. If the GDP is large, the income per capita will also rise, as a result of which the standards of living will increase. People will be able to afford more goods and services as their purchasing power increase with an increase in income, this in turn will lead to economic growth.
A large GDP might not solve the problem of equatable distribution of wealth. This is because the richer section of the society will contribute more to the GDP and thus will profit more as well. The producers will be better off than the consumers and thus, there will be an income gap between the rich and the poor. Rather than doing good by increasing the income per capita for each individual, there might be a negative effect of an increase in GDP as the income inequality will rise whereby the richer section of the society gain more than the poorer.


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