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Summary The Measure of Economic Health.docx The Measure of Economic Health ECO203 The Measure of Economic Health GDP, or Gross Domestic Product, is defined as the value of final goods and services that are produced in a country s territories within a certain$7.49
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Summary The Measure of Economic Health.docx The Measure of Economic Health ECO203 The Measure of Economic Health GDP, or Gross Domestic Product, is defined as the value of final goods and services that are produced in a country s territories within a certain
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The Measure of Economic H The Measure of Economic Health ECO203 The Measure of Economic Health GDP, or Gross Domestic Product, is defined as the value of final goods and services that are produced in a country s territories within a certain time period, which is usually a year (Callen, 2020). ...
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The Measure of Economic Health
ECO203
The Measure of Economic Health
, GDP, or Gross Domestic Product, is defined as the value of final goods and services that
are produced in a country’s territories within a certain time period, which is usually a year
(Callen, 2020). GDP is important because it gives you the status of how the economy is running
and performing. The growth rate of GDP is used as an indicator of the health of the economy.
Increase in GDP means the economy is doing well, while decrease in GDP means the economy
is in poor condition. An increase in GDP means companies are hiring more people and there is
less unemployment and inflation (Amacher& Pate, 2019). A decrease in GDP raises the inflation
and unemployment rate.
The most important shortcoming of GDP in examining an economy’s health is
government spending. Government spending would take GDP’s usefulness away and take money
away from individuals who paid money for those services provided. Prices for government
services is not set by the market, therefore the calculation of their value is marked by a measure
of arbitrariness (Frelling, 2012). Another shortcoming is GDP’s inability to account for
productive non-market activities. This is important in a few significant ways. For example,
something important would be someone raising a family, it isn’t provided on the market so it
isn’t accounted for by the GDP, and this can increase social welfare (Frelling, 2012).
GDP is not a good measure of well-being. The GDP uses market prices to value goods
and services, it excludes all the activity and production that takes place outside of the market
(Inflab, 2019). Another thing that GDP excludes is the quality of the environment. Firms could
produce goods and services, creating pollution, rising GDP, and making well-being fall. For the
most part, GDP is a good measure of well-being for somepurposes, but not all. It is massively
significant to remember what is included in GDP, and what is left out.
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