Question

Higher gross domestic product (gdp) means greater per capitaavailability of goods in the economy.'' do you agree with the givenstatement? Give valid reason in support of your answer

Answer 1

Answer:

$\pink{My own reasons}$

I do not agree with the given statement. With the increase in the gross domestic product, the availability of goods and services also increases. However, we cannot say that the per capita availability of goods in the economy increases with an increase in the GDP. This is possible only when the other factors which affect the Welfare are assumed to be constant. GDP as an index of the welfare of the economy is insufficient. The following points support my answer:

a. The composition of the output produced that has led to an increase in the GDP should be considered to know whether or not GDP has to lead to an increase in the Welfare of the economy. For example, war materials such as guns and high-end luxurious products do not add any will to the welfare of the majority of the population.

b. GDP only considers monetary transactions. In many less developed countries, transactions take place in the rural and the household sector in terms of nonmonetary value. These are not within the purview of GDP which leads to a wrong estimation of its value.

c. The increase in the GDP may also be as a result of the increase in the income of just a few individuals. A majority of the citizens might not be able to gain benefit from the rise in GDP.