Let us make an in-depth study of the relationship of GDP with Economic Well-Being. Clearly, in evaluating the welfare effects of a proposed economic policy, it is necessary to apply the cost-benefit principle. It is not sufficient to consider only the likely effects of policy on GDP. It is also necessary to know whether the policy will affect other aspects [...]
The following points highlight the six main factors affecting GDP. The factors affecting GDP are: 1. Leisure Preference 2. Non-Marketed Activities 3. Underground Economy 4. Environmental Quality and Resource Depletion 5. Quality of Life 6. Poverty and Economic Inequality. Factor Affecting GDP # 1. Leisure Preference: Due to technological progress, average productivity of resources (including manpower) has gone up in [...]
Underestimation of Inflation by GDP Deflator! The GDP deflator underestimates true inflation. The reason is that the GDP deflator reflects the prices of all goods and services produced domestically consumers, whereas the CPI reflects the prices of all goods and services bought by domestic consumer. For example, suppose the price of an airplane produced by an Indian company which is [...]