The Definition of Economic Growth and Gross Domestic Product

Define economic growth and explain why Gross Domestic Product fails to provide an accurate overview of the quality of life of a nation. Economic growth is a positive change in the level of production of goods and serVices by a country over a certain time period. Nominal growth is defined as economic growth including inflation, while real growth is nominal growth minus inflation. Economic growth is usually brought about by technological innovation and positive external forces. Even though Gross Domestic Product has been employed as a statistical measure of economic development since the 1950’s.

it does not qualify as an accurate reflection of a nation‘s development status. Gross Domestic Product measures the total market value of all goods and serVIces which have been produced in a country Within a specific period of time and, on the per capita level, diVIdes the total value of the economy, or its size, by its population figures.

As may be deducted from the foregomg, therefore, it does not discriminate between the rich and the poor, thereby indicating poverty levels and, it does not calculate literacy or gender equality levels, to name a critical few.

As a case in point, one may refer to the fact that according to this statistical measure Qatar. Kuwait. and the United Arab Emirates rank 2nd, 4th. and 5th as the most developed countries in the world according to Gross Domestic Product. These countries are not democratic, do not uphold gender equality and have been repeatedly cited by Amnesty International for human rights abuses.

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This is a clear indication of the extent to which Gross Domestic Product contributes to inaccurate readings of national development status, and indeed, fails to provide an accurate reading of the living standards of those countries.

In direct comparison, the United States of America, Great Britain and France, to name a few, are all democratic nations which uphold gender equality. While there are some cases of human rights issues, the level of the problem is not nearly as high as of those in the Middle East. In accordance to the Gross Domestic Product per capita statistical measures, these countries rank as the 7th. 2151. and 25m on the global Gross Domestic Product scale. This is a clear indication of the extent to which Gross Domestic Product contributes to the immaculate reading of the national development status and, indeed, fails to provide an accurate reading of the livmg standards and quality of life enioyed or suffered, by the population.

As the weakness of Gross Domestic Product ultimately lives in that which it does not measures, it needs to be supplemented With poverty index, human development index and gender development index measures. The poverty index (PI) provides an accurate indication of the percentage of the population which is liVing above, at, or below the poverty line and, hence, is an indication of IIVing standards and the distribution of the wealth in a society. Gross Domestic Product is not an accurate measure of a country’s economic status and development levels, Added to that, it is certainly does not provide a clear and accurate reading of the standards of liVing enjoyed by a nation. It does however; provrde valuable insight into the size of an economy. Thus, it does have its uses and precisely because of this, it should be maintained.