Activities


1. What is Counted in the GDP?

The Gross Domestic Product (GDP) is the measure of the market value of all final goods and services produced in a country during a given year. Why are we concerned only with final goods and services? It's because we understand that the process of production includes all the processes involved in creating the good (or service), and delivering it to the final consumer. To avoid "double-counting", the GDP ignores the market value of goods that are not yet ready for sale to consumers.

Please place a circle around the items in the list below that should not be included in the GDP.

automobiles
restaurant equipment
wheat
construction equipment
new prison buildings
big macs
CD players
road paving machines
orthodontics		highways
warehouse inventory
toxic waste cleanup
roofing shingles
dentists' supplies
swimming pools
film actors' salaries
automobile engine parts
theatre tickets

2. What is Counted in the GPI?

The GDP has traditionally been considered as the most important measure of economic growth and well-being. Particularly, Per-capita GDP (the national Gross Domestic Product divided by the number of people in a nation), is used as a measure of the level of a nation's economic development. Recently, however, many economists have argued that the GDP is not an accurate measure of economic growth, because it counts things that have a market value, whether or not they actually do more harm (in the form of external costs) than good. For example, if acid rain destroys a stand of old trees in a residential neighborhood, the cost of having the dead trees removed is counted up as part of the GDP. They propose that we use a different measure, called a Genuine Progress Indicator (GPI) to measure our progress and providing things that really do satisfy human desires.

Here is a list of things that are indluded in the GDP Please place a circle around the items that should not be included in the GPI. Aftyerward, students should compare their lists and discuss their choices.

handguns
pet rocks
drug rehab
toxic waste cleanup
hairstying
body piercing
plastic surgery		burglar alarms
nuclear weapons
space exploration
bulletproof vests
reality TV
fur coats
optional V8 engines

3. Comparing GDP and GPI

Please study the graph below, and then answer the following questions:

  1. The 1990s are considered a time of great prosperity. Why, then, does the GPI figure decline during that decade?
  2. If the GDP is increasing more quickly than the GPI, what does that tell us about society's ability to sustain its rate of growth?
  3. Can you imagine a time when the GPI would increase more rapidly than the GDP? How would such a period differ from today's economy?
  4. When you compared your responses in activity #2 above, was there a lot of disagreement? What does that tell you about the difficulty of designing a national measure of genuine progress?
  5. Name three ways in which the United States could increase its GPI.

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