Explain the instances where Real GDP per person might be a misleading indicator of economic well-being.
Answer:
GDP is the market value of goods and services produced by an economy during a year. Since, goods and services satisfy the want of the people, GDP has often been used as a measure of economic welfare of people. However while calculating GDP per capita, we add something which does not increase the economic well being of people and omit certain items which increase the welfare or well being. Following are the items or instances where real GDP per capita can be a misleading indicator of economic well being:-
(1) GDP does not include the value of satisfaction that people derive from leisure.
(2) Non marketed personal services are not taken into account. For example- the services rendered by housewife although it greatly raises the satisfaction and welfare of people.
(3) The consumption of goods and services enhances the welfare of people but the production process emits pollutants which adversely affects the welfare. Hence it needs to be deducted from the real GDP per capita.
Explain the instances where Real GDP per person might be a misleading indicator of economic well-being.
Real GDP tends to understate our economic well-being because it Includes the value of volunteer activity Includes health care costs related to the consumption of cigarettes Includes expenditures on crime prevention equipment . Excludes the value of leisure Includes the value of services produced in the home
Explain why the real GDP in constant dollars might be inaccurate measure of economic activity?
Richland’s real GDP per person is $5,000, and Poorland’s real GDP per person is $2,500. However, Richland’s real GDP per person is growing at 2 percent per year, and Poorland’s is growing at 4 percent per year. Compare real GDP per person in the two countries after 10 years and after 20 years. Approximately how many years will it take Poorland to catch up to Richland? Instructions: Enter your responses as whole numbers. GDP per person GDP per person after...
What is GDP? What is real GDP? What are the problems in taking real GDP as an indicator of well-being? How and why is the measurement of real GDP ambiguous.
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Explain in 250 words: Gross Domestic Product is not a perfect measure of economic well-being. There are many activities that create income but do not increase "well-being". Explain how this occurs and give examples. Although GDP is not a perfect measure of economic well-being, it is the best statistic we have. Explain why this is true.
Our economic well-being (RGDP per capita) increases when output per person rises (called productivity), average working hours increase, or the employment-population (EPR) increases. However, only one of these components significantly contributes to a rise in our standard of living and economic growth, productivity. (a) Explain why the other two components ( average working hours and EPR) are not a significant contributor to our economic well-being. (b) Provide the three types of investment that can cause long term growth and productivity....
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Name of country that you are comparing to USA: ECONOMIC INDICATOR USA OTHER COUNTRY GDP ($) Purchasing Power Parity Define: Comment: GDP per Capita ($) Define: Comment: Real Growth Rate (%) Define: Comment: Unemployment Rate (%) Define: Comment: Population Below the Poverty Line (%) Define: Comment: Distribution of Family Income – Gini Index (Out of 100) Define: Comment: Taxes and Other Revenues (% of GDP) Define: Comment: Public Debt (% of GDP) Define: Comment: Inflation (%) Define: Comment:
In any period during which real GDP rises, output per person and the average standard of living automatically rise as well.