Question

What is real GDP as opposed to nominal GDP? Is GDP a good measure of the well-being of a country?.

Answer 1

Real GDP refers to the money value off all services and products produced by an economy in a year. The price of base year is considered for the calculation of real GDP. On the other hand The current year prices for services and goods are taken into consideration for the calculation of nominal GDP.  The nominal GDP is divided with that of the deflator to obtain the value of real GDP. Nominal GDP is not adjusted for inflation whereas real GDP is adjusted. Real GDP can be used to compare the prices with two or more years but thee nominal GDP can be compared only with eh quarters of a particular fianci8al year. Nominal GDP is not a good indicator for evaluating the growth of economy. Real GDP can be used to analyze growth of economy.

GDP is not at all a effective measure to measure well being of a nation. Some of the reasons for not cconsideri9ng GDP as good measure to measure human well being are it ignores things which is not expressed in monetary terms, It ignores the cost of depleting natural resource, strength of marriage, children health, educational quality etc. The income is not distributed equally to everyone is an economy. So even thought eh overall GDP increases we cannot say that the standard of living of nation increase. The GDP considers all the goods including harmful products in the calculation of GDP. Thus GDP will increase also with the increase in production of harmful products. But we cannot say the welfare of people increased in such a situation. Because of all the above reasons GDP is not a good measure of welfare of human.