02 Feb Gross Domestic Product

GB540 Economics for Global Decision Makers

Unit 4 discussion

DQ1 Factors Affecting Economic Growth

It is highly recommended that you review the Seminar presentation located in the Seminar area before beginning the Discussion.

There are a number of economic and noneconomic factors that affect long-run economic growth of countries. Among these factors, roles of physical capital, human capital, technology, and natural resources in influencing long-run economic growth of aggregate output per capita are widely discussed. Governments also play their roles in promoting and sustaining long-run economic growth of countries.

Based on your reading of Chapter 26, other course materials, and your knowledge and experience, analyze the following questions.

What factors might contribute to low or high growth rates in a country? How can sustainable long-run economic growth rate be realized? What are the roles of the government in achieving sustainable long-run economic growth?

Why resources are no longer the most important indicators of economic growth disparity among countries? Which other economic and noneconomic factors do you think explain the reasons behind growth disparities among countries?

What is the relationship between economic growth rate and unemployment rate?

DQ2 GDP and Its Limitations

It is highly recommended that you review the Seminar presentation located in the Seminar area before beginning the Discussion.

Gross Domestic Product (GDP) measures the market value of the final goods and services produced within a country during a given period of time. In other words, GDP measures continuous flow of money from households to firms and then back to households in the macroeconomy. (Refer to Chapter 25)

The trend of the GDP growth rates is the key indicator of macroeconomic fluctuations (business cycles), which include expansion, boom, contraction, and recession. Thus the real GDP is used to explain how well the overall economy of a country is performing whereas GDP per capita is used as a natural measure of the economic well-being of the average individual in a given country. But GDP has limitations and it is not a perfect measure of the economy and economic health.

In spite of the limitations (shortcomings), why is the GDP used as a measure of national income as well as a measure of national economic well-being?

Is the GDP measure underestimating or overestimating national production and total income in the economy during various business cycles? Why?

What are the limitations of the GDP in measuring total output and national welfare? What products (services) are excluded from the GDP computation?

What are the impacts of the shortcomings of the GDP as a measure of the national product and national economic welfare (well-being)?