Gdp, Is It a Useful Measure of Living Standards?
Gross Domestic Product (GDP) measures the monetary value of final goods and services produced in a given year by factors of production within a country. GDP reports are released on the last day of each quarter, reflecting the previous quarter. Therefore, it is measured on a quarterly basis and measures the level of economic growth in different countries. GDP is commonly expressed as an international currency and is useful because it is widely known, easily calculated and provides a useful statistic for comparison. These figures can help us determine whether a nation’s economy has …show more content…
Additionally, a society with longer working hours (LEDC) will have a higher GDP, but less leisure time and not necessarily greater well-being
Alternatively, a society with a more even income distribution will have a greater level of well-being. Generally, LEDCs, who have little income and weak economies would value $10,000 more than MEDCs. Consequently, GDP per capita is effective when basic needs are not being met (LEDCs), so an increase in consumption of goods and services would lead to greater happiness and greater well-being. Rich societies tend not to be happier than poor societies, which is known as the Easterlin Paradox.
Standard of living is defined as the level of wealth, comfort, material goods and necessities available to a certain socioeconomic class in an area. Standard of living includes social, cultural, environmental and political factors such as income, poverty rate, life expectancy and access to quality health care to name a few. GDP is a factor of standard of living however it is not the solitary constituent. GDP per capita does not take any of the other factors that define ‘standard of living' into consideration. This is a limitation as true representation of standard of living is not achieved by only evaluating the GDP per capita of a country because there are many other components incorporated in the definition.
Problems that occur when measuring GDP in monetary terms is that it doesn’t show the purchasing power of money. Purchasing Power