Gross domestic product

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Why might GDP not be considered an accurate measure of economic well-being of a country?

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Explanation & Answer

The GDP does not adequately reflect the true health of a nation and needs to be replaced by more comprehensive measures.  The GDP measures the nation’s economic performance because it is determined by the market value of all final goods and services and has been used since 1934. Using this measure exclusively has placed the U.S. at or near the top for decades. Yet, many experts today argue these measures are far too narrow to gauge the overall health of a nation and its people. And that presents a problem for the U.S.

Since the institution of GDP figures and country rankings, other measures of the quality of life have appeared. For example, The Organization for Economic Cooperation and Development (OECD)annually issues a report based on a study of 140 countries, indicating the levels of happiness in those countries. For at least the last decade, European countries such as Denmark, Finland, and the Netherlands and other countries such as Canada, Australia and New Zealand have ranked at the top and the U.S. has not made the top 10.

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