FAQ IN ECON A232
FAQs in Econ A232
Discuss three problem of real GDP per capita as a measure of economic well-being.
Real GDP per capita is not the best single method to measure economic well-being because:
1. GDP measures the market value of all final goods and services produced in a country within a given period of time. However, it cannot measure unreported activities such as homemade or illegal goods or services.
2. Some social issues may affect citizens’ happiness such as unemployment and income inequality. GDP cannot reflect positive or negative externalities involve in the consumption and production but these externalities do affect on people’s living standard. Negative externalities such as pollution brings environmental costs to society but not calculated by GDP. Positive externalities such as technological advance benefits to society but it is not count in GDP. Economic well-being would be under-value or over-value if GDP is the only single measure of economic well-being.
3. Leisure helps people enjoy a better life. In countries with lower GDP, the welfare gain from leisure can compensate the welfare loss from low GDP.
Explain why frictional and structural unemployment are unavoidable in most of the economies.
There are always some workers without jobs, even when the overall economy is doing well.
For example, people now prefer cell phones from Apple than from Nokia. Nokia decides to cut down its employees due to the decrease of revenue. It takes time for him (the worker) to search another job that is best suited for him. In this period when matching jobs and workers, he is unemployed and it is called frictional unemployment. Another example is that now most of the textile factories decide to move to mainland China. A worker in one of these factories loses her job, however, she is unable to learn or change new working skills or knowledge on other speciality or other field. And therefore, she cannot find a new job in her original industry and also in
Discuss three problem of real GDP per capita as a measure of economic well-being.
Real GDP per capita is not the best single method to measure economic well-being because:
1. GDP measures the market value of all final goods and services produced in a country within a given period of time. However, it cannot measure unreported activities such as homemade or illegal goods or services.
2. Some social issues may affect citizens’ happiness such as unemployment and income inequality. GDP cannot reflect positive or negative externalities involve in the consumption and production but these externalities do affect on people’s living standard. Negative externalities such as pollution brings environmental costs to society but not calculated by GDP. Positive externalities such as technological advance benefits to society but it is not count in GDP. Economic well-being would be under-value or over-value if GDP is the only single measure of economic well-being.
3. Leisure helps people enjoy a better life. In countries with lower GDP, the welfare gain from leisure can compensate the welfare loss from low GDP.
Explain why frictional and structural unemployment are unavoidable in most of the economies.
There are always some workers without jobs, even when the overall economy is doing well.
For example, people now prefer cell phones from Apple than from Nokia. Nokia decides to cut down its employees due to the decrease of revenue. It takes time for him (the worker) to search another job that is best suited for him. In this period when matching jobs and workers, he is unemployed and it is called frictional unemployment. Another example is that now most of the textile factories decide to move to mainland China. A worker in one of these factories loses her job, however, she is unable to learn or change new working skills or knowledge on other speciality or other field. And therefore, she cannot find a new job in her original industry and also in