International Difference Between Gdp and Quality of Life

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Macroeconomics
Assignment 1

Project report:
International difference between GDP and Quality of life

Subject name: Macroeconomics
Teacher’s name: Dr. Nguyen Trong Hoai
Student’s names:
1) Ho Tran Thuy Nguyen
2) Nguyen Le Hoang Phuong
3) Phan Hoang Anh Thu
4) Huynh Thi Thu Ha
5) Le Phuoc Thanh Tin
6) Loi Kim Chau
7) Han Khanh Phương
8) Le Hoang Vu
9) Vu Quang Huy
Date due: 15/05/2011

Table of Contents

I/ Introduction:3

II/ GDP- a powerful tool for economics measurement:4

III/ Why is GDP not a perfect measure of well-being?7
1.Leisure time:7
2.The environment:8
3.Non-market activity:10

IV/ Conclusion:11

I/ Introduction:

It is no doubt that if people want to judge a person is doing economically, they usually first look at his or her income. Similarly, when talking about an economic condition of a country, it is not surprise that people most frequently look at the average income of that nation or in other word, Gross Domestic Product (GDP) per capita. To be more specific, the most commonly accepted method of comparing generalized differences in quality of life on a whole between nations is to use GDP per capita on purchasing power parity (PPP) basis in current international dollars. In our report, we propose to clarify the usefulness (the reason why economists use GDP per capita as a major measurement) as well as the limitation when using GDP to measure the economic well-beings of a nation. Before looking at pros and cons of GDP, it is necessary to know how GDP and GDP per capita are defined. The economists definite Gross Domestic Product (GDP) is the market value of all final goods and services produced within a country in a given period of time, while GDP per capita is the GDP of a country divided by its population. The difference between GDP and GDP per capita is also an important thing which must be considered. A country with high GDP does not mean it has high GDP per capita because by definition, it can result in the large population of that country. For example, India may have a very high GDP index compared to some other countries. However, India has very large population as well that explains why GDP per capita of India is rather low. Thus, most economists concentrate on GDP per capita because it is more accurate than GDP to shows the relationship between the economic growth of a country and its standard of living. We start first by looking at the advantages of using GDP per capita to evaluate economic well-being. II/ GDP- a powerful tool for economics measurement:

As mention above, GDP per capita is major measurement for economists to make sense of how well the economy is. The first advantage of GDP per capita is that it is simple and convenient to measure. In addition, being one of the earliest measurements of economic activity to be developed, it is widely used, making it the most commonly available measure of economic activity. Further, it is very simple to ascertain with no subjective or judgmental elements. Although by definition, GDP does not include the elements of living standard such as healthcare, educational system, leisure time etc… However, we strongly agree that a large GDP in fact help us to obtain a better standard of living. To support our point of view, we compare and contrast GDP with some available index data which can be represent for quality of life including HDI index, improved water source, maternal mortality. The table below takes an example of some countries ranked in order of GDP per capita. Besides, it also show three factors (HDI index, improved water source and maternal mortality) which can be considered as parts of standard of living. Countries| GDP per capita($) 2003| HDI| Improved water source| Maternal mortality per 100,000 people| US| 37,545| 0.942| 100%| 8|

Japan| 33,129| 0.941| 100%| 8|
Germany| 29,582| 0.928| 100%| 8|
Mexico| 6,326| 0.814| 97%| 55|...
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