Since Country A has a higher GDP than Country B then this must mean the residents of Country A are better off in terms of economic welfare. Discuss - Essay Example

It is defined as the market value of final goods and services produced within the domestic territories of any country in some given period of time. Since it is income that determines the types, the qualities and the quantities of what one can consume, GDP does determine the standard of living that can be afforded by the nation’s citizens. How ever it should be noted that although GDP represents the aggregative amount of resources that is produced within the nation, the access to these resources for the individual people of the economy depends upon the distributional pattern of the same (McConnell & Brue, 2005).

Now, economic welfare in essence represents how well off the people of any nation are, or particularly to the level of wellbeing of the nationals. The notion of wellbeing is dependent upon quite a few factors of which income is a very important part. Income for individuals determines their purchasing power and thus access to resources and thereby determines the potential standard of living. Thus on a national scale, the standard of living affordable for the members of any economy is finally determined by the level of national income or GDP.

However, welfare or wellbeing also depends upon the quality of life. Again quality of life depends upon a number of factors of which some may be determined by the level of income while others are not. For instance while the condition of healthcare or national security that can be made available to nationals is in a major part determined by the GDP. However, how much satisfactory or welfare enhancing such conditions will be vary subjectively. Further, certain subjective and non-quantifiable factors such as emotional adversities affect the wellbeing which is thus not always entirely dependent upon GDP (Mankiw, 2002).

Also, non-marketed production does not enter GDP calculations. Thus, household production such as a garden simply created and maintained for amenity benefits to a family does not enter GDP until its