GDP as a Sufficient Measure of Economic Progress and Quality Of Life in a Country

GDP as a Sufficient Measure of Economic Progress and Quality Of Life in a Country


Gross Domestic Product (GDP) acts as a measure of the economic output (total final market value of the goods and services generated within a nation for a specific period). The topic on GDP is relevant for me because it is the most used measure of economic activity, frequently measured on a quarterly or annual basis. Organizations such as IMF, World Bank, and UN evaluates the progress of a country by comparing its GDP with that of its peers. In essence GDP measures all investments, consumption, government spending and the total exports less the total imports. GDP is a market measure meaning that value of different dimensions indicated above is computed regarding their conceived market prices. Economic factors that do not have any price tag are not factored in in the GDP of a country. This means that GDP excludes important economic performance factors such as the ‘core’ economy that include informal economy, service provided in the household, odd jobs, and the voluntary activities that facilitate economic growth and promote social cohesion. The IMF statistics indicates that informal economies make up to 45% contribution in the output of the developing country’s economy, 30% in developing economies and 20% in more industrialized countries (Costanza et al 44). Given that GDP does not factor in all economic capital input, this study seeks to answer the question: Is GDP a sufficient measure of economic progress and quality of life in a country?

Limitations of GDP as a Measure of Economic Progress and Life Quality

GDP serves as a market throughput’s estimate. It adds together the value of the goods and services that are traded for money for a particular time. Typically it sums up total personal expenditure on consumption, expenditure by the government, net capital formation, and net exports. Figure 1.0 below illustrates a representation of the circular flow of expenditure and income in a market econ

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