explain why you either agree or disagree with the biggest weakness of GDP that they identified. GDP is calculated by exp
Posted: Sun Jun 05, 2022 11:30 am
explain why you either agree or disagree with the
biggest weakness of GDP that they identified.
GDP is calculated by expenditures and income – that is,
expenditures are the sum of money spent purchasing goods and
services, and income is the sum of earnings and production.
Consumption can be calculated by households purchasing a dozen eggs
at the grocery store. Investment would be considered purchasing
real estate. Government procurement of COVID-19 testing kits would
be considered an expenditure in calculating GDP. Net exports would
be corn and wheat sold & supplied to other countries. One
good/service not included in Real GDP calculations is cash tips and
cash wages – this can be exemplified by small-town diners employing
staff with cash payment in order to maintain lower business costs
or babysitting children for a neighbor. These cash transactions are
not tracked with any kind of paper trail and thus cannot be counted
in a country’s GDP. The largest weakness of GDP would be income
inequality. When the proverbial lion’s share of income is earned by
a functional minority of households, this is left unaccounted for
in GDP calculations. This will result in households spending less
on goods and services, not just in the short-term but long-term
which can have far-reaching effects. GDP calculations do not
account for income distribution and offer no solutions to income
inequality.
biggest weakness of GDP that they identified.
GDP is calculated by expenditures and income – that is,
expenditures are the sum of money spent purchasing goods and
services, and income is the sum of earnings and production.
Consumption can be calculated by households purchasing a dozen eggs
at the grocery store. Investment would be considered purchasing
real estate. Government procurement of COVID-19 testing kits would
be considered an expenditure in calculating GDP. Net exports would
be corn and wheat sold & supplied to other countries. One
good/service not included in Real GDP calculations is cash tips and
cash wages – this can be exemplified by small-town diners employing
staff with cash payment in order to maintain lower business costs
or babysitting children for a neighbor. These cash transactions are
not tracked with any kind of paper trail and thus cannot be counted
in a country’s GDP. The largest weakness of GDP would be income
inequality. When the proverbial lion’s share of income is earned by
a functional minority of households, this is left unaccounted for
in GDP calculations. This will result in households spending less
on goods and services, not just in the short-term but long-term
which can have far-reaching effects. GDP calculations do not
account for income distribution and offer no solutions to income
inequality.