Let's explore the concept of using GDP to measure economic well-being. What are some of the items that are included in GDP? What are some of the items that are not included? For example, the investment associated with a new factory and its equipment would be included. However, what we often call the "investment" activity of buying and re-selling shares of stock is not included as this does not reflect the actual production of goods and services. What would be included is the income of any stockbrokers used as this reflects the production of a service! It is in this respect that GDP attempts to measure true economic activity, which would then be correlated with other macroeconomic indicators such as employment.
Is everything that makes us happy included in GDP? Of course not! Non-market activities are generally excluded from GDP. So for example, if I cook a wonderful dinner the only thing that really shows up in GDP is the value of the groceries and any energy consumed in the preparation, cooking, and cleanup of my meal. However, if an elaborate meal is purchased at a full-service restaurant the market value, which includes labor as well, is much higher.
For this discussion, everyone should construct a list of 5 to 8 items with each list containing both goods, services, or income that would be included in GDP and a few examples of things that would not be included. Be specific about what you think would and would not be included, and why.
Also, take a moment to explore the website of the Bureau of Economic Analysis, bea.gov. This is the source of official data on GDP. What was the most recent announced growth rate in Real GDP in the U.S? What do you think this implies for current economic health in the U.S.?
On balance, what do you think of GDP as a way to measure well-being?
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