Question

There was a sharp increase in the rate of wealth of accumulation by financiers and corporate elites during the housing boom of 2004 to 2006 in the United States (US), resulting in rising economic inequality. Would this housing boom result in an increase or decrease in measured GDP in the US during 2004 to 2006? Discuss whether GDP is a ‘good’ measure of progress in this case.

Answer 1

Gross domestic product is a indicator of national prospority and better quality of life. The policy makers all over the world refer GDP growth as an index of good governance of the economy.A rise in GDP makes an indication of good management of the economy. The benifit of GDP growth are so forcibly presented that we remain ignorant about its costs,one is led to belive that GDP growth is a universal remedy for all economic problems.during the housing boom in US it resulted in increase in measured GDP of the country.

GDP is a good measures of progress from the following point of view-

I. GDP refers to the production of final goods and services in the economy during an accounting year, a gradual rise of GDP obviously mean a rise in consumption of the residend of the country.

II. GDP growth is often linked with a greater opportunities of employment.

III. GDP growth leads to a shift in the level of potential output.

IV. A rise in GDP leads to a rise in self sufficiency and cut down draining of resources.

V. The GDP growth effect flows down to the lower section of the society and there is a rise in government revenue