Economics is a field of study that deals with demand and supply, fundamentals of production, national income, inflation, etc. The purpose of the current paper is to assess the following: how GDP correlates with the American living standards, the effect of inflation on households, impact of technology on unemployment and wage levels, whether GDP is the best economic growth indicator, and whether the Americans are better today than ten years ago.
Gross Domestic Product as a Measure of Standards of Living
Gross Domestic Product (GDP) describes the market value of finished products that are produced within a particular nation in a specified period (Frank, 2014). GDP encompasses private and public consumption, investments, and exports excluding imports that take place in the US and the governments outlays. GDP per capita has mostly been used as a measure of living standards of the Americans for a long time (Frank, 2014). GDP is computed using the below formula:
C- Consumer expenditure
G- Government expenditure
I- Investments in the country
NX- Total net exports (total exports minus total imports; NX=Exports-Imports)
GDP is a perfect measure of living standards of the Americans since GDP provides a better interpretation of economic activities via rates and alterations that occur in the economy, which in turn affects lives of citizens (Frank, 2014). GDP further helps policy formulators and forecasters to regulate and execute various economic strategies. Nevertheless, GDP serves as a proxy for social and economic welfare (Frank, 2014). However, GDP also got its cons that include the following: GDP does not encompass non-market operations that significantly affect people's living standards and it does not take into account domestic household goods and services in the cycle. Furthermore, GDP does not ruminate whether there is an equal dissemination of wealth in the country (Frank, 2014).
As compared to Human Development Index (HDI) (HDI refers to the complex indicator of education, life expectation, and per capita income of a nation that helps in ranking of nations in terms of human development), GDP is better since HDI uses data that may be unreliable and there are better methods of measuring education and health qualities than HDI (Frank, 2014).
Impact of Inflation on Households
Inflation refers to the rate at which universal price levels of goods and services increase subsequently, thus decreasing the purchasing power of the currency of a given country (Frank, 2014). Prices only become steady when average prices of products are constant for some period or when prices have been rising at diminished and projectable proportions (Frank, 2014). Inflation affects the value of money and assets; it also re-disseminates wealth amongst different people and groups. It leads to unemployment since companies cannot be able to maintain a huge staff, as well as being unfavorable for the balance of payments and investments (Frank, 2014).
The major impact of inflation on common citizens is the rise of prices for households for such goods as flour, cooking oil, sugar, salt, bread, etc. Personally, inflation has had an enormous impact on the way I purchase bread. Bread used to cost so little, but with inflation it has become expensive (Frank, 2014). I used to buy bread daily, but now I cannot do that because it has become expensive for me. I have looked for ways of substituting bread and they are a bit cheaper and healthier, for instance, arrowroots, cassava, sweet potatoes, etc. I also suspect that the price levels of bread are going to increase; hence, I would still be affected (Frank, 2014). The increase of bread price may not impact rich people or poor people the same way it has affected me. The rich will not feel this impact, having to add some extra dollars to buy bread. Thus, their living standards would remain the same, while the poor would have it rough and possibly forget about bread completely (Frank, 2014).
Impact of Technology Advancement on Unemployment and Wages
Technological improvement has taken root in the contemporary world as all organizations have embraced technology and have been improving along with the evolving technology (Frank, 2014). All organizations want to be up-to-date on everything new that comes with new technology. Technology has simplified communication around the world, improved logistics, etc. The modification of the labor market is one of the highest technological enhancements (Frank, 2014). Technology improvement is a necessary evil in the job market ast it leads to unemployment, while also curbing unemployment. Whenever there is a new technological discovery, it creates job openings for the personnel who will head the advancement and help the rest of the organization to familiarize themselves with the new technology (Frank, 2014). In turn, unskilled and low-skilled employees will lose their jobs as the new technology would absorb their jobs, for instance, technology has enhanced communication and storage of documents. Thus, it is likely that the staff in the registry department will be fired, as well as the staff at call centers of different companies. Automatically, with the sudden loss of jobs unemployment of the nation would increase as a result of technological advancement (Frank, 2014).
Technology and innovation developments are responsible for a remarkable productivity of many companies (Frank, 2014). There is an inverse rapport between productivity and employment levels. Thus, the higher the productivity as a result of the technological improvement, the lower the employment level will be as explained above (Frank, 2014). Consequently, with a low number of employees in a company and more production the level of wages will automatically increase. The few employees would enjoy good salaries; hence, their standards of living would also improve (Frank, 2014).
Why a Growing Economy Is Considered to Be Important to the Well-being of a Nation
GDP is a commonly used measure of the economic growth of a nation. GDP is a relatively accurate indicator of an economy size and, hence, it can be used to define the growth of a nation (Frank, 2014). GDP enables legislators and central banks of different nations to evaluate whether the economy has been growing or shriveling and take necessary measures whether to inject boosters or withdraw from the market. The growth of an economy defines the well-being of a nation through good living standards of citizens, low inflation rates that make life relatively cheaper to all citizens, low unemployment rate in the country, a favorable balance of payments, an equal distribution of wealth among individuals and groups, successful investments that yield good profits, etc. (Frank, 2014). A nation with the above-mentioned indicators of economic growth is a country that has been doing well and has not been struggling too much (Frank, 2014).
Is GDP the Best Indicator of a Growing Economy?
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Most economists find GDP to be the best measure of growing economy even if it has its drawbacks. For instance, it does not take into account concealed economic activities such as the black market; it also emphasizes economic output without giving much thought to the economic well-being (Frank, 2014). All in all, GDP is still a good measure; since it is defined as the sum of all products produced in a given country over time, GDP keeps track of the results of every year and can compare it with the results of the following year. Hence, it can be used to assess whether the economy has been growing or declining (Frank, 2014). Although it is sometimes impossible to track all the goods and services in a country, GDP tries to come up with almost real results more than other economic indicators (Frank, 2014).
Are Americans Better off Today than They Were 10 Years Ago?
The Americans are relatively better off today than they were ten years ago. Using the US GDP, it is evident that is has been consistently growing, hence showing that citizens are financially and economically better today that they were ten years ago (Reifowitz, 2016). As it has been discussed above, GDP measures a nation's growth and standards of living. Subsequently, the growing GDP of the US shows that the economy has grown and people are no more living below poverty lines; thus, their standards of living have improved (Reifowitz, 2016).
Using the life expectancy indicator, most Americans now tend to live longer than ten years ago. The government has enabled institutions to come up with ways how to feed well and do away with foods that threaten peoples life. These agencies provide various dietary and nutrition programs that guide people on how to eat healthily.
Using the health indicator, most Americans can now afford going to the hospital and getting proper medical help cheaply (Reifowitz, 2016). This is because of the Affordable Care Act that was suggested by President Barrack Obama that most Americans can now access different insurance programs that allow them to receive treatment without much struggle (Reifowitz, 2016). The Affordable Care Act has also enhanced peoples' life expectancy as everybody can be treated and avoid an early death. There is also the Obamacare from which all states of America have benefited as they can receive healthcare without challenges and it has allowed many Americans to get health coverage (Reifowitz, 2016).
Using the unemployment rate indicator, it has been noted that in the past ten years the level of unemployment has declined and the national deficit has consequently gone down (Reifowitz, 2016). New corporations have been set up, which has helped to curb the unemployment problem; technological advances have also helped considerably (Reifowitz, 2016).
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