Question

You are at a holiday dinner with your family. Your relative makes the argument that the U.S. economy is resurgent and has recovered from the Great Recession of 2007 – 2009. Economic growth, as measured by GDP, has been increasing from one quarter to the next. You beg to differ. How would you structure your argument with your relative? Hint: you should think about two things, the accuracy of GDP measures, and whether GDP should be considered a comprehensive measure of a countries well-being.

Answer 1

Arguably, it is wrong to say that the U.S economy has recovered from the great depression of 2007-2009 since measuring of economy performance based exclusively on GDP has some limitations.

Arguably, it is wrong to say that the U.S economy has recovered from the great depression of 2007-2009 since measuring of economy performance based exclusively on GDP has some limitations. First, the accuracy of GDP measurement is not absolutely correct as the measurement is estimated values and not actual or correct value. Additionally, GDP measurement is not as comprehensive as one may think since it excludes nonmarket transactions which also accounts for the economic wellbeing of the country. The two most important notions to differ in the agreement will base on GDP values being estimate and approximations and not actual values making the accuracy of GDP measures questionable. Another reason for disagreement is the exclusion of some transactions in GDP measures thereby limiting the comprehensiveness of the economic performances.