happyplanetindex. Secondly, inequalities in wealth and revenue whereby the standard income may increase however inequality could heighten. Another reason is that criminal activities, such as drug dealing, prostitution, or racketeering, are obviously better kept underground. indexmundi. You can use GDP to examine all economies of the world, from the United States to Somalia. It is already assumed that real GDP shows the total amount of growth in value in specific year. The added value is basically the difference between a firm’s income from sales and the cost of its purchases from other firms. Limitations of Real GDP. The major advantage of using GDP per capita as an indicator of living standards is because it is used widely, frequently and consistently. It is measured widely as GDP is available for most countries in the world, allowing comparisons to be made. 5 The Inflation Rate: Oliver (2006) states that ‘Inflation is a sustained rise in the general level of prices in the economy-called the price level. Concept of the GDP / GNP 2.1 Definition of the GDP, GNP and growth rate 2.2 Advantages of the GDP / GNP 2.3 Preconditions for the use of GDP / GNP 3. 5. http://www. This is national income divided by population and gives a rough guide to average incomes. http://moneycentral.msn.com The benefit of using GDP per capita to measure the standard of living is that it is used widely in the world so this allowed countries to make comparison (Burda and Wyplosz, 1997). There are many productive activities that are not included in GDP because it only measures … 3-Month Real GDP tends to increase as a nation’s standard of living improves; however, GDP does not capture some very important social measures. Despite this, most countries still use GDP to assess standard of living and ‘development’, and it is easy to understand why. This change was meant to provide a better approximation of the income actually available to a country’s residents (see Kovacevic 2010). The textbooks generally point out five problems with using GDP … If real GDP were not used, then you wouldn’t know whether it was real growth, or just price and wage increases. GDP is also used as an indicator of a nation's overall standard of living because, generally, a nation's standard of living increases as GDP increases. They argue that official information on GDP does not state the growth of real national income per capita over a period because of the shadow economy and the value of the unpaid work by the volunteering people as well people taking care of the families in a nation. Is the genuine progress indicator or GPI if the Population increase GDP automatic decrease as a measure of.! 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