1. GDP and Economic Well-Being Lesson 6-2

2. GDP should be adjusted to real GDP accounting for inflation in order to be acceptable as any kind of measure of well- being.

3. Measurement Problems in Estimating Real GDP Revisions Counting GDP is such a large task that the data is still preliminary 3 months after the fact and still subject to revision. The Service Sector Service sector output is hard to measure because it is often difficult to say what a unit of output is in the service sector. Exactly what does a teacher or a customer service representative produce? The service sector is a growing portion of the USA economy.

4. Conceptual Problems in Real GDP Household Production GDP does not measure products and services households provide for themselves such as cleaning or house maintenance. If someone is hired to do these jobs for a household, that is counted as part of GDP. Underground and Illegal Production GDP can only count economic activity that leaves a paper trail. Any economic activity that is not reported is not counted.

5. Conceptual Problems in Real GDP Leisure Activities that take place during non working time are valuable, just not counted as part of GDP. Again, there is no way to count such activities. The GDP Accounts Ignore “Bads Some argue that adverse production such as pollution damage or use of non renewable resources should be subtracted from GDP figures. Once again, problems counting such things have them omitted from GDP data.

6. International Comparisons of Real GDP International comparisons of real GDP and GNP may not be totally accurate because of differences in methods of collection and the conceptual problems described earlier. Per capita real GNP is a country’s real GNP divided by its population. Per capita real GNP adjusts national income measures by the population, indicating how much was produced per person. Care must be exercised in interpreting per capita real GNP as straightforward international comparison data for well-being.

7. Even with its measurement problems, international comparisons of GDP show stark contrasts between nations as seen in Exhibit 6-10 on page 140.