Meaning and Measurement of GDP. Suppose nominal GDP in India increases by 1,400
ID: 1102463 • Letter: M
Question
Meaning and Measurement of GDP. Suppose nominal GDP in India increases by 1,400 billion rupees and nominal GDP in the U.S. increases by 100 billion dollars over the same period. List, in order of importance, five problems that arise in trying to assess whether “human welfare” has risen or fallen in India compared to the U.S. using this aggregate, nominal GDP data. Only a brief explanation is needed of how you manipulate data to generate meaningful comparisons. Meaning and Measurement of GDP. Suppose nominal GDP in India increases by 1,400 billion rupees and nominal GDP in the U.S. increases by 100 billion dollars over the same period. List, in order of importance, five problems that arise in trying to assess whether “human welfare” has risen or fallen in India compared to the U.S. using this aggregate, nominal GDP data. Only a brief explanation is needed of how you manipulate data to generate meaningful comparisons.Explanation / Answer
1) The data given does not talk about income distribution . Rise in nominal GDP may reflect that overall income in the economy has risen but speaks nothing about income gap or distribution .
2) Rise in nominal GDP does not mean rise in real GDP . It is measured by price level. So even if income has risen , rise in purchasing capacity depends on real GDP .
3) The value of currency or exchange rate also matters in case of comparison because that decides the outstanding balance deficit and demand for goods in world market which affects welfare .
4) The data says nothing about literacy rate , mortality or life expectancy rate among both the nations .
5) The data also says nothing about infrastucture or budget deficit of any of the countries .
All these factors are essential in measuring human welfare . Welfare depends on economic development and not just growth . So it is difficult to compare just based on GDP figures .