Gross Domestic Product (GDP) - Research Paper Example

However, it does not mean that other factors such as crime, unemployment rate and pollution levels are at low or minimum levels. This is because GDP does not factor these issues in the above equation and does not take these issues into consideration. As such, a positive GDP will not necessarily mean a country has a low unemployment rate when the economy is “good”. Logically, if a country has positive GDP growth, it means that economy is “good”. Thus, businesses profit and demand for labor to meet the market demands for supply of goods and services grows.

Increased demand for labor will also result in higher wages offered and lead to a decrease in the unemployment rate. Crime rates may decrease as people have jobs to support the cost of living; but this factor is not calculated in the equation. So when the economy is “good” as shown by the positive GDP, it does not mean that everything is “good” for its people. As an example, think about the rising cost of health care, which would be classified in the equation as consumer spending (C).

Although the increase in consumer spending will contribute positively to the GDP, this is under the mistaken assumption that all individuals in the family can afford higher health care costs (Schwartz, 2010). This is also the case for the costs of education and leisure. If a GDP is positive, it does not necessarily mean that all of the people in the country have more money for leisure and can afford higher education costs. A developed nation almost always has a high GDP (Wikipedia), but at what cost does this development come?

The question arises as to whether their development is detrimental to the environment. When businesses expand, they will need more space to build offices and other developments for people’s benefit. This will see a reduction in green areas or even deforestation; and myriad pollutions by industries- be it air, water or sound pollution- will also