LIMITATIONS OF GDP AS A MEASUREMENT OF STANDARD OF LIVING

Question 1

POINT ONE GDP DEFINITION

Answer 1

the total value of all goods and services produced within a country in a given period of time

Question 2

POINT TWO IT IS USED BECAUSE

Answer 2

GDP is used as an indicator of a nation’s overall standard of living because, generally, a nation’s standard of living increases as GDP increases.

Question 3

POINT TWO - ADVANTAGES

Answer 3

Most countries calculate it therefore easy to compare quickly, GDP is easy to compare to others therefore efficient there is often a link between HIGH GDP with GOOD HEALTHCARE and good education systems

Question 4

POINT THREE - HOWEVER IT DOESNT TAKE INTO ACCOUNT INEQUALITY

Answer 4

GDP doesn’t take into account the level of inequality in a country, inequality is measured by GINI, South Africa has the highest wealth inequality which makes it an inaccurate measurement for standard of living. doesn’t take into account money made from illegal activity so it does not affect GDP which makes it an inaccurate estimate in countries like in Mexico where there is a $25–30bn yearly profit from drug cartels.

Question 5

ALTERNATIVES TO GDP WHICH ARE BETTER

Answer 5

In conclusion the HDI (United Nations’ Human Development Index) is much better because HDI uses 2 types of social data (health and education) and 1 type of economic data which means that the measure uses a broad range of information and is not tied up with only one measure. This is a much more accurate measure of standard of living compared to GDP