Gross domestic product is defined as “the nation’s expenditures on all the final goods and services produced in the country during the year at market prices.” In the U.S., it is compiled by the Bureau of Economic Analysis (BEA), a federal agency within the Commerce Department. By measuring expenditures on goods and services, the BEA estimates the dollar value of the production of all goods and services produced in the domestic economy in a year’s time.
GDP is the most common metric by which economists and policy makers measure the economic value and well-being an economy creates. Similarly, per capita GDP—that is, GDP divided by the population—is commonly used to make international comparisons of the living standards of people in different countries. To measure the well-being of an economy relies on other measurements as well: employment and unemployment situations, labor force participation, labor productivity, or long run growth factors, to name a few.
Yet, many economists and others have noted that GDP is a very limited tool for fully understanding well-being and progress. In fact, some organizations have developed alternative ways of measuring these important values.
Purpose
The purpose of this assignment is to critically evaluate GDP and other standard measurements, and find alternatives to supplement the missing information of measuring a society’s well-being. By doing so you will become more familiar with the essential ways in which economists measure the macroeconomy, as well as the limitations of these standard methods. The tasks in this assignment include four questions to be answered:
- Define and identify the standard measurements of the economy.
- Evaluate the merits and some limitations of these standard methods.
- Choose an alternative to evaluate it along with the standard measurements as different ways of measuring well-being of a country.
- Contrast the standard measurement and the alternative measurement in measuring a society’s well-being.
This assignment supports the course learning outcomes: - Discuss basic concepts and theories in macroeconomics.
- Formulate independent conclusions about economic issues and policies.