The Gross Domestic Product and Its Alternatives

Document Type:Annotated Bibliography

Subject Area:Macroeconomics

Document 1

However, the GDP can also be calculated based on quarterly or semi-annually basis. In GDP, the flow money, in dollar valuation is being considered as the core factor. This is to mean that only the goods and services that are on trade, or rather a transaction, account for the GDP, and not those that are in stock, such as the natural resources that have been discovered and not yet exploited. GDP is one among the many economic tools that are used to measure the economic performance and the social well-being of a particular country. It takes into account the consumption within the country, which includes both the public and the private consumption, the government expenditures such as on infrastructure, health, and even education, the investments, as well as the net export (which are evaluated by subtracting total exports from the total imports of the country). From the above elements of the GDP, the calculation formula GDP= C+G+I+NX is derived. The measurement is also based on three approaches, which include the income approach, the expenditures approach and also the output approach also known as the net product approach (site). Despite its long time usage as the best and most effective economic wellbeing indicator, economists have over the decades have given various critiques on its incapability to comprehensively account for all the factors that add up to the economic and social well-being of a country. In this paper, the focus will be on the strengths of this economic indicator, the weaknesses as well as the alternative tools that can be used together with GDP to measure the economic and social wellbeing of a country.

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First, I will begin with the strengths of GDP that make it applicable for almost six decades now. This, therefore, provides a comprehensive and conclusive global report on the business environment, by giving the best regions for good foreign investments. It also keeps the country on check for the major economic influences such as inflation, regression and even depression of their currency against other superior currencies (Harvie et al. On the other side, there are different criticism that this tool has received which are mostly based on the various factors that determine the society’s wellbeing that are not included in the GDP calculation. Firstly, GDP does not account for non-market activities and illegal trades. Non-market activities are those activities that do not entail valuable or profit making business transaction. In addition, the GDP is not the best tool to determine the social and economic wellbeing of a nation due to its technical controversies in the calculation.

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As stated earlier, there are four elements that constitute the calculation of GDP. These are the country’s consumption, expenditure, investment and the net exports. There are controversies and misunderstanding amongst the various economists between the consumption element, the expenditure, and investment. Some economic activities undertaken by the government have long term investment effects, but yet require instant expenditure and consumption (Fioramonti, 2013). The alternatives to GDP in the measurement of the economic and social wellbeing or performance of a country should include the omitted elements in the GDP as well as exclude or moderate the unnecessarily included attributes. There are several alternative tools that economists have laid forth that are all round inclusive for both the economic and non-economic activities of a country. Among these alternatives is the Genuine Progress Indicator (GPI).

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The GPI includes the environmental attributes such as pollution and crime rates and even the social attributes such as poverty levels and personal health, which are not accounted for in the GDP (Bleys, 2012). Therefore, the GPI takes into account the green sustainable economic and social improvement of a country by factoring on the effects of production and consumption patterns through the consideration of the economic, environmental and social attributes. THE GROSS DOMESTIC PRODUCT AND ALTERNATIVE ECONOMIC AND SOCIAL INDICATORS. Retrieved May 08, 2017, from http://publications. gc. ca/Collection-R/LoPBdP/BP/prb0022-e. htm Bleys, Brent. Economic Well-being and British Regions: The Problem with GDP Per Capita. Review of Social Economy 67, no. jstor. org/stable/41288481.

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