Introduction
Gross Domestic Product (GDP) measures total income of everyone in the economy.
It’s also measures total expenditure on the economy’s output of the country (Amadeo, 2019).
Besides that, GDP has four components which are consumption (C), investment (I),
government purchases (G) and net exports (NX). When those components add up
(C+I+G+NX), then it will get the amount of GDP which is denoted as Y (Kenton, 2019).
First, the total expenses of households on goods and services are explained about the
consumption. Second, investment is the total expenses on goods which will be used to
produce more goods in the future. Third, government at the local, state and federal levels pay
for all the expenses on the goods and services, which are explained about the government
purchases. Lastly, exports minus imports will equal to net exports. Then, imports are the
portions of C, I, and G which are paid on goods and services produced in a foreign country,
while exports are the foreign expenses on the economy’s goods and services. In addition,
there are two ways to measure a country’s GDP such as nominal GDP and real GDP. For
example, to get the values output, nominal GDP is used the current prices and real GDP is
used the prices of a base year. Other than that, the inflation in this two GDP also difference,
which is not corrected in nominal and corrected in real.
Describe contributions of Gross Domestic Product to economic well-being of society
a) Leisure time
Contributions of GDP to economic well-being of society are includes expenses on
diversion and travel however it does not cover leisure time (Thoma, 2016). Obviously,
nonetheless, there is a significant contrast between an economy which is large because people
work long time in a day, and an economy which is just as large because people are
increasingly profitable with their time, so they do not have to work as long time per day.
b) Actual levels of environment cleanliness, health and learning
Next, GDP does not include actual levels of environment cleanliness, health and
learning even though it is included what is paid on environment protection, healthcare and
education (Dvorkin and Bharadwaj, 2017). GDP includes the expense of purchasing
pollution-control tools, however it does not address whether the water and air are really
dirtier or cleaner. GDP includes expenses on medical care, but does not address whether new
born child or future mortality have increased or decreased. Likewise, it counts expenses on
education, but does not address directly the amount of the population can do basic
mathematics, read or write.
c) Cover production that is not traded in the market
In addition, GDP does not cover production which is not traded in the market (Inflab,
2018). For example, the person who done the tasks is not part of GDP, but we employing
someone to clean our house or cut our yard are part of GDP.
d) Level of inequality in society
Other than that, GDP has nothing to state about the level of inequality in society and it
is just an average for the GDP per capita (Pressbooks, 2019). When GDP for every person in
the society has increased by 5% or some groups has increased by more while the GDP of
