GDP or Gross Domestic Product. What does it really mean and how does it affect our economy?
Gross domestic product (GDP) refers to the market value of all final goods and services produced within a country in a given period. But, what are the pro's and con's in using GDP as a Measure of Economic Dev't in relation to the Human Dev't index?
here are the pros:
If a G.D.P. is abundant and in great demand worldwide or even in a secular region than the nation with control of that G.N.P. can accrue a vast profit - benefiting it's nation - due to the control of supply and demand derived from said product.
long hx of use - a lot of historical data to compare
many countries use it - comparison
easy to calculate
consistently measured across all countries (uniform)
here are the cons:
If said G.N.P. is non-abundant or even not sought after - i.e. , of little financial worth - than unless that national product is a food or energy source that will benefit it's own citizens it will remain economically inert.
does not include domestic household products, or black market.
does not consider the "real value" of money as it uses price * volume (yet prices change based on inflation, purchasing power of the dollar changes).
if compared with other years it does not accurately measure the changes in productivity (thus use REAL GDP)
does not consider how the wealth of a nation is distributed
does not take into consideration the cost of productivity externalities (green house gas emissions on neighbouring countries)
