TOPIC: FOR GRADE 12B:
"There are so many difficulties in measuring living standards that we can never be sure that people in one country are better off than those in another country."
Comment upon this statement.
Time Duration for submitting the Article is
April 29th to May 5th, 2013
Write your opinion here in 500 Words. [20 Marks]
"Marks allocation will be in accordance to the Rubrics"
Note: I will give zero if your writing are not in accordance to the rubrics mentioned by me.
Wilson:
ReplyDeleteGovernment have a role to increase welfare or living standard of society. When government fail to do so, it will affect the country as a whole. A government measures the total output of a country in order to judge the performance of the economy. An economy is usually considered to be doing well if its output is growing at high and sustainable rate. A government uses a variety of measures of country's output. These are known as national income statistic. It's one way to measure standard of living. The most common measurement of national income is by means of GDP (Gross Domestic Product). It is the total output produced at home country. It include consumer's spending, government spending on goods and services, total invesment, changes in stock and the difference between exports and imports. When GDP is high, it's likely that standard of living is high as well. If a country's real GDP per head is higher this year than last year, it's expected that the country's resident will be enjoying higher living standards. Real GDP per head is found by dividing total real GDP by the country's population to give an average figure. However, it's possible that real GDP per head increase but some people not experience rises in income and some even suffer reductions in income. The change in real GDP per head may not reflect the true change in the quantity of goods and services that consumers can enjoy due to undeclared economic activity changes over time. A rise in the hidden economy may mean that people are experiencing a higher standard of living than appear. For example during war, output is rise. More weapons are being produced but not many people will say that the quality of their live increase. It should be noted that consumer goods not the capital goods will increase people's living standard. A decline in environmental conditions may decrease the living standars but not the real GDP.
We can't judge that a country with higher real GDP per head are having higher living standars than people living in a country with lower real GDP. As stated above, a real GDP figures may give a misleading impression of a country's output. To compare living standards between countries we need to convert the real GDP into a common currency. To avoid the comparison being irrelevant by exchange rates, we need to see from the point of view of their purchasing power parities. Its' power of currency to buy goods and services. For example: suppose that the exchange rate is US$1 equal to Rp 10,000. Nominal GDP per capita is $3910 compare to US which is $49,922. On average, people in USA are 13 times better off than people in Indonesia. However, if using $1 can buy more goods and services in Indonesia than in USA, then using the exchange rate to convert rupiah into dollars will exaggerate USA's output. There are some measurement that are not in the real GDP per head but considered to assessing living standards. These are working conditions, political freedom, fear of crime quality of environment and type and quality of products produced. When there is income inequality, then real GDP per head is not showing the real standard of living of a person in a country.
In conclusion, we can't make sure that people in one country are better off than those in another country. When size of hidden economy and non-marketed goods are high, then it's no use to compare country's GDP as it doesn't reflect the real standard of living. Hidden economy is less in a country with strong government supervision and regulations. In developing economy, non-marketed goods are high as some of them do self provision.