In: Economics
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?
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.