• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

GPD countries

Extracts from this document...


Evaluate the use of GDP figures as a mean of comparing countries INTRODUCTION Gross Domestic Product (GDP) is one of the measures of national output in a given country's economy. Basically, it is defined as the total cost of all finished goods and services produced within the country in a period of one year. There are three methods of measuring GDP: national expenditure (the value of spending by households on goods and services), national income (the value of income paid by firms to households in return for land, labour and capital) and the most common method - national output (the value of the flow of goods and services from firms to households). GDP figures are the most common tools to compare countries, because they take into account consumption, investment, government spending, exports and imports within a country. They compare countries by measuring the size of the economies and the flows of money. However, GDP does not consider all features of the economy such as composition of output, working conditions, externalities, nonmarketable services or happiness. METHODS OF DATA COLLECTION In an attempt to compare countries by GDP figures, there has to be one method of data collection. ...read more.


It is also a common method in measuring the standard of living in each country. For instance, it cannot be said that there is higher living standart in India (GDP PPP = $2,966 bn) than in Poland (GDP PPP = $623 bn), as India has much bigger population. After calculating GDP PPP per capita, it appears that each Pole earns $16,200 a year, while each Indian earns only $2,600. WHAT GDP DOES NOT MEASURE? GDP does not measure the composition of output and therefore cannot be a good indicator of standard of living. For example, according to CIA WF the GDP PPP per capita is 13% higher in Oman ($19,000) than in Lithuania ($16,800), so there should be higher standart of living in Oman. However, GDP PPP per capita does not take into account that Oman spends 11.4% of GDP on military, while Lithuanian military expenditure is equal to 1.2% of GDP. Because of that, there is higher standard of living in Lithuania, because it spends more money for its infrastructure, education and health system. It is impossible to measure positive and negative externalities by GDP. A country such as China has GDP more than twice bigger than Germany, but it produces six times more greenhouse gases than Germany. ...read more.


Lithuania is a country with the highest murder rate in the world (9.38 per 100 thousands inhabitants per year), while Oman is the 5th country in the world with the lowest murder rate (0.59 per 100 thousands inhabitants per year). In July 2006, the New Economics Foundation introduced the Happy Planet Index (HPI), which was invented to challenge GDP as it does not measure the happiness. According to it, USA with the highest GDP PPP in the world is 150th country out of 178 in terms of happiness. It has to be stated that GDP does not reflect the quality of goods. When a quality of a good is improved and the price of it falls, then GDP also falls despite the fact that the quality of a good improved. GDP does also not take into account educational level, productivity of the public sector, life expectancy, level of democracy, economic freedom and many other variables. CONCLUSION GDP figures are quite perfect when comparing the outputs and size of economies of different countries. However, GDP figures are not really useful when comparing with respect to standard of living or different feature. There are many indexes such as Human Development Index, Democracy Index, Happy Planet Index or Environmental Performance Index, which can be also used to compare countries. ?? ?? ?? ?? ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related International Baccalaureate Economics essays

  1. Economics Assignment Methods of Calculating National Income

    = Nominal or current GDP/Price deflator * Does the price deflator take into account the increase in quality of goods and services and the fall in the prices of goods such as videos and computers? * Population increases: cause GDP to rise but not necessarily per person: * To adjust

  2. Strategic and Operational Performance Assessment at Petrom

    In this way, the company continues to fulfill its customers' requirements and to put out all efforts to achieve the objectives it committed to. The capabilities of the new communication system are perfectly suited to evolve in tandem with Petrom's business strategy.

  1. Why might a given increase in real GDP not accurately reflect an increase in ...

    Naturally, in a region in which living costs are relatively lower than other regions, a lower real GDP does not indicate lower standards of living. In addition, a growth in real GDP might not reflect a rise in living standards because the GDP also does not take into account the population of the region or the income disparity.

  2. Vacation In Australia

    The second determinant that is going to be examined is population. In the case of Colombia we must consider that is a third world country which has 22 million of poor people. The high class who is the one that can afford vacation in Australia is very small and even

  1. Equal rights for women in labour market in Lithuania

    rights are the absence of disadvantages for both sexes in participation in the economic, political and social life.2 Though it is widely acknowledged that equal rights are the fundamental principle of nowadays democratic society, there are still many difficulties in achieving the real equality de facto not only in Lithuania, but also in other democratic countries.

  2. Coursework: Is Chester Zoo value for money?

    The professional Face painting service, which is highly popular with the younger children, is available here during school holidays and weekends. Arara Shop Open during peak periods only, the Arara Shop sells a smaller range of popular goods and is located near to the Spirit of the Jaguar enclosure.

  1. What are the stages in economic development? Discuss this in reference to at ...

    and exports are certainly exemplary in boosting the economy of a country. It gives rise to the age of technology. People are skilled in all the fields and dimensions-be it computers, scientific research or engineering.

  2. 15 Historical Economic Questions on Mercatilism and the Development of European Countries.

    Some of these theories are still seen in today?s capitalist system. Every inch of a country?s soil be utilized for agriculture, mining or manufacturing. This becomes difficult for a country to do when such restricting economic policies were put into place.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work