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Is Robert Kennedy Right to Believe That “Gdp Is a Deficient Measure of an Economy’s Welfare”?

In: Social Issues

Submitted By gseabrook
Words 1222
Pages 5
Introduction
Gross Domestic Product (GDP) is defined as the market value for final goods and services produced in an economy over a certain period. There are three main approaches to GDP: production, expenditure and income. Although there are many components that make up these three categories, the basic principle according to national accounting is that Production=Expenditure=Income.
GDP is used very regularly when talking about an economy’s wellbeing, it is useful for seeing if an economy is expanding or contracting and if so at what rate.
Although GDP can be very useful, there are certain factors that it overlooks which are important. I am going to discus whether or not GDP is still a useful and reliable measure of the economy’s welfare.

Why is GDP used so much?
Although GDP may not be the only important figure giving all relevant information about an economy, it is certainly one useful tool in seeing the value of goods and services produced. Economic growth is defined as the increase in market value of goods and services produced in an economy over time. As GDP measures exactly this value, it makes perfect sense that it is used to measure economic growth. GDP is often converted into a single currency (often US dollars) to allow comparison between different economies. Real GDP is also adjusted for inflation so that a change in the price of goods does not give an inaccurate picture of the true growth of the economy. When interpreted well, the real GDP can be used to compare economies, and show us whether a given economy is expanding or contracting, and by what rate it is doing so.
Although GDP is not a measure directly of welfare (level of prosperity and living standards of either an individual or a group of persons), it can be considered as an aspect of welfare as it measures the production of goods and services in an economy. Therefore a higher GDP,…...

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