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

Principle Of Economics - Essay ExampleAs stated in Sloman & et. al. (2012), various policymakers and economists use gross domestic product as the stripe of stinting well-being. Countries be also often graded according to their GDP values in order to decode their economic development in resemblance to other economies in the global network (Sloman & et. al., 2012). However, an in-depth understanding to the concept reveals that economists cannot or most justifiably should not focus only on measuring GDP when quantifying the progress of an economy. In other words, there are certain limitations possessed by the concept of evaluating national 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 reasons for GDP to lack in recording 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 differently 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 support at home and deliver their services to take care of their baby, the countable opportunity cost of hiring a professional 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 production becomes erroneous (Sloman & et. al, 2012). Similarly, GDP calculation procedure also does not take into account the currency flow generated through illegal trading that is normally attributed as underground economy. Underground economy specifically comprises of illegal and undeclared exercises. 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 exposed for the tax purpose and hence, remain unsung in the GDP calculation procedure (Sloman & et. al., 2012). It is in this context that GDP lacks accounting for intangible variables sourced within the nation to ensure the well-being such as health, happiness, and woes. It also does not include environmental impacts of production functions practiced within the economy, additionally ignoring the unequal distribution of health (Sloman & et. al., 2012). Notably, one major problem set about 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 taken into account, countries like India and China, those have greater volume of population, shall be better off in comparison to Austral ia, which is much advanced than the mentioned nations in terms of technology, nucleotide 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,