Question

1. GDP is defined as the market value of all final goods and services produced within a country in a given period of time. Market values are estimated based on price. However, in Kuwait, in the Friday market used goods are sold and some of them as an input to the production of final goods and services. Critically evaluate how do the Friday market activities effect nominal and real GDP, standard of living and residence happiness in Kuwait?

2. Sri Lanka is an island and relatively a poor (Miskeen) country. Yet it has plenty of natural and/or environmental resources (beaches, forest and mountains) and very good climatic condition.   GDP fails to take account the value of environmental resources, yet people use and benefit from it. Discus the ways and means to account and include the environmental resources in national income accounting. Discuss the ways and means these benefits from the natural resources (beaches, forest and mountains) are reflected in on people lives and livings?

Answer 1

first question-

• though sale and purchase of second hand goods are not included in the calculation of GDP,but the income generated by the utilization of second hand goods are included in the calculation.this concept is applicable in Kuwait's market also,this concept can be understood by following example-
• suppose A purchased a second hand machine from B for $10000,which would help in the manufacturing the textile and clothes.this machines leads to yield A $4500 in a year.thus the $10000 would not be included in the calculation of GDP but the calculation will include the amount of $4500 because it is earned by employing workers,using resources like raw material which has given manifold impact in the economy.
• thus in the kuwait's market when second hand resources are bought and sold then people use these resources to productive activity and generate income which make positive impact on this country's GDP,increase the income and subsequently enhance the standard of living.

second question-

• GDP includes the calculation of only final goods and services in the economy,this lacks in the country like Sri Lanka even having large availability of natural resources.therefore the GDP of such countries are lower.
• GDP of these kind of countries are quite low.but these countries can take advantage of their natural resources like beaches,forest etc to promote tourism,trekking events which would helps the countries to increase their GDP through services sectors.these countries can provide raw material to different sector globally.