Discuss the Usefulness of Gdp as a Measure of Living Standards, and as a Way of Comparing Living Standards I) Across Countries Ii) Across Time.
Discuss the usefulness of GDP as a measure of living standards, and as a way of comparing living standards i) across countries ii) across time.
Gross Domestic Product (GDP) is the total market value of all goods and services produced in a country in a given year. It is equal to the total consumer, investment and government spending, plus the value of exports, minus the value of imports. The GDP report is released on the last day of each quarter and reflects the previous quarter. However, GDP is to a certain extent only useful as a measure of living standards when converted into US$ / the same currency to enable helpful comparisons to be made, divided per capita and then put in real terms.
When answering this question it is important to define exactly what do we mean by living standards? According to freedictionary.com it is; ‘A level of material comfort as measured by the goods, services, and luxuries available to an individual, group, or nation.’ However on an alternative website, investorwords.com it is defined as; ‘The financial health of a population, as measured by the quantity of consumption by the members of that population.’ These definitions do not entirely match up, proving living standards is a hard term to define, it can be interpreted differently from person to person. During this essay the pros and cons of using GDP to measure living standards will be considered and there will be further commentary into how and what is meant by living standards.
When using the GDP as a measure of living standards we divide the GDP for the country by the number of people in the Country, and as a result we get GDP per captia. This means that the number given is simply an average, and it does not represent the wide spread of income across the country. It does not show regional variations. A perfect example of this is the north and south divide in the UK. According to BBC news, people living in the south are more likely to be better educated and earn more money
Gross Domestic Product (GDP) is the total market value of all goods and services produced in a country in a given year. It is equal to the total consumer, investment and government spending, plus the value of exports, minus the value of imports. The GDP report is released on the last day of each quarter and reflects the previous quarter. However, GDP is to a certain extent only useful as a measure of living standards when converted into US$ / the same currency to enable helpful comparisons to be made, divided per capita and then put in real terms.
When answering this question it is important to define exactly what do we mean by living standards? According to freedictionary.com it is; ‘A level of material comfort as measured by the goods, services, and luxuries available to an individual, group, or nation.’ However on an alternative website, investorwords.com it is defined as; ‘The financial health of a population, as measured by the quantity of consumption by the members of that population.’ These definitions do not entirely match up, proving living standards is a hard term to define, it can be interpreted differently from person to person. During this essay the pros and cons of using GDP to measure living standards will be considered and there will be further commentary into how and what is meant by living standards.
When using the GDP as a measure of living standards we divide the GDP for the country by the number of people in the Country, and as a result we get GDP per captia. This means that the number given is simply an average, and it does not represent the wide spread of income across the country. It does not show regional variations. A perfect example of this is the north and south divide in the UK. According to BBC news, people living in the south are more likely to be better educated and earn more money