Principle Of Economics Essay Example | Topics and Well Written Essays - 2000 words

Principle Of Economics - Essay ExampleAs stated in Sloman & et. al. (2012), confused policymakers and economists use gross domestic product as the measure of economic well-being. Countries are as well as often graded correspond to their GDP values in order to decode their economic development in comparison to new(prenominal) economies in the global network (Sloman & et. al., 2012). However, an in-depth understanding to the concept reveals that economists stomachnot or most justifiably should not centralize only on measuring GDP when quantifying the progress of an economy. In other words, there are reliable limitations possessed by the concept of evaluating solid groundal progress or development depending exclusively on GDP. For instance, GDP has often been criticised to lack in measuring the outputs of all services as well as goods. As a result, the values of few goods as well as services go unrecorded thus, understating the nations economic growth. There are mainly two reaso ns for GDP to lack in transcription goods as well as services. For example, when people tend to perform their own labour work without involving a third party, the manpower invested or otherwise marketed is not recorded in GDP statics. Illustratively, if parents hire a babysitter for their baby, the service cost is counted as the part of GDP but, if the parents decide to stay back at home and deliver their services to take care of their baby, the countable opportunity cost of hiring a passe-partout is not considered as the part of the GDP. At the national level, hen similar attributes remain uncounted or ignored to be measured appropriately, the national activities remain understated and the true value of economic output signal becomes erroneous (Sloman & et. al, 2012). Similarly, GDP calculation procedure also does not take into account the currency ascend generated through illegal trading that is commonly attributed as underground economy. Underground economy specifically compri ses of illegal and undeclared transactions. The transaction could be illegal in the forms of drugs trading, prostitution and smuggling among others. Again, the transaction can be stated as undeclared only in the sense that they are not unresolved for the tax purpose and hence, remain unidentified in the GDP calculation procedure (Sloman & et. al., 2012). It is in this mount that GDP lacks accounting for nonphysical variables sourced within the nation to ensure the well-being such as health, happiness, and woes. It also does not include environmental impacts of intersection functions practiced within the economy, additionally ignoring the unequal distribution of health (Sloman & et. al., 2012). Notably, one major problem faced by economists when measuring well-being or similar intangible variables by using GDP is that it does not include population of a nation into an account. If these variables are interpreted into account, countries like India and China, those have greater vol ume of population, shall be better off in comparison to Australia, which is oft advanced than the mentioned nations in terms of technology, infrastructure and other production function variables. Again, as per the common principles of GDP, when the production increases it may be attributed to the technological advancement. On the contrary,