Comparing Standard of Living and Quality of Life Between Countries Using GDP

827 Words2 Pages

Gross Domestic Product (GDP) is the market value of all final goods and services produced by factors of production within a country in a given period of time. It can be calculated using either the income, output, or expenditure method as illustrated on the circular flow of income diagram below. Standard of Living, in a purely material dimension is the average amount of GDP per person in a country (therefore determining access to goods and services). However the term has a much broader, non-material dimension involving issues of quality of life and are therefore much more difficult to quantify. There is no single measure of SoL, but a range of indicators, which can be used together to give a good idea of a countries’ SoL. Reasons for GDP figures alone giving an incomplete understanding of SoL in a country will be explained in this essay, along with problems faced when comparing levels of development between countries. Raw GDP figures give a very poor and non-comparable indication of a countries’ SoL if they do not take into account the size of a nation’s population. Real GDP per capita (Real GDP/population) is a much better measure when comparing countries as it takes into account both inflation, as well as the population of a country. Whether total or per capita, GDP figures are a very useful indicator of a countries SoL but only look at a single material dimension, that of income, output, or expenditure. They are not an explicit or accurate measure and do not incorporate the non-material and non-quantifiable dimension to SoL. A key component of SoL not included in GDP calculations is the weightless economy, which although it brings economic benefits creates problems for the collectio... ... middle of paper ... ...angible aspects and so GDP should be used as an indicator in conjunction with other measures such as the Human Development Index, Genuine Progress Indicator (adjusts GDP figures income distribution) and the European Quality of life survey. This will give a more accurate and complete picture of Standard of Living. Works Cited EconGuru Economics Guide - Circular Flow of Income Diagram (Online) http://www.econguru.com/wp-content/uploads/2009/01/circular-flow-of-income.png Accessed 10/03/10 CIA World Factbook - Distribution of family income - Gini index (Online) https://www.cia.gov/library/publications/the-world-factbook/fields/2172.html Accessed 10/03/10 International Monetary Fund – Economic Issues No. 30 (Online) (http://www.imf.org/external/pubs/ft/issues/issues30/index.htm Accessed 10/03/10 Sloman, J. (2006) Economics 6th Edition; Prentice Hall

More about Comparing Standard of Living and Quality of Life Between Countries Using GDP

Open Document