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GDP Is Not Enough - Research Paper Example

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GDP Is Not Enough Austin Nelson Marymount Manhattan College The Gross domestic product has been used as a measure of economic growth and performance for a number of countries; the United States included. The GDP has always been criticized of not showing the real picture of economic performance of a nation due to its limitations…
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GDP Is Not Enough
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Download file to see previous pages This paper provides an annotated bibliography for the topic GDP is not enough (Adam, 2009). Gross Domestic Product (GDP) refers to the net value of all final production of goods and services in a country. GDP is often measured and calculated in three ways: first, is summing up of all the incomes and profits received from goods and services produced in a country; second is summing up of all expenditures incurred in the production of goods and services i.e. adding up of money earned from exports and deducting all that is used on importation; lastly is summing up all the value added by capital and labor in situations where inputs are procured from other producers and converted into output. GPD accounts only for the flow experienced in an economy thus excluding stocks, wealth and capital investment as this do no account for direct financial transactions, where change of money occurs (Buxton, 2002). Gross Domestic product basically calculates the economic activities with nation’s borders while Gross National Product (GNP) is concerned with the gross income of the citizens in that country. GNP sums up interests, rates, rents, profits and dividends paid out by outsiders. Policy makers are often much interested with the economic activity level thus making GDP to be more preferred. Although not accurate in an extended period of time, GDP offers a complete snapshot of the economy. It offers a summary of the entire range of economic information into a single number, thus reflecting on comparative weaknesses and strengths of various economic sectors. It is a precise In most cases, an increase in economic growth is often accompanied by equal increase in both income and employment. GDP therefore seeks to estimate such changes in economic and social welfare. However, it can only give a precise figure of certain other contributing factors remain constant. Economic analysts believe that GDP reflects on the general welfare so precise enough to assume it as an equivalent measure on welfare. However, critics such as think tank Redefining Progress (discussed below) believe that GDP does not reflect concisely the total utility measures (Chien, 2010). Traditionally, economists have been using GDP measure to approximate the economic progress. An increases in GDP value meant the particular country is progressing. Consequently, a fall in GDP meant that the particular nation is rapidly ceding ground. From a strict arithmetical aspect, DGP offers a straight forward indicator to economic wellness. However to a common man, GDP statistics can be deceiving. To counter this ambiguity, Redefining Progress- social think tank came up with the Genuine Progress Indicator (GPI) in 1995. This idea was nurtures as an alternative to the convectional GDP as a parameter for estimating the economic and social wellbeing of a country. The two indicators are based on a common personal consumption data baseline. However, GPI unlike GDP gives adjustment factors and variables that represent both monetary and non monetary aspects of the country’s economy. The adjustment categories can be grouped into the following categories; Personal consumption: this baseline gives similar data input similar to what is used in GDP measurement. Income Distribution; under this, GPI is scaled upward when a higher percentage of a country’ ...Download file to see next pagesRead More
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