In the field of economics, there are many measurements that attempt to quantify the economic wellbeing of an area. Many of which are used like a scorecard in order to try to improve upon itself. However, these measurements, as well as they quantify variable data, they are not without their shortcoming on how they gather their data. Indicators such as unemployment rate, inflation and GDP are vulnerable to misrepresenting the economic climate through issues revolving around how their information is collected and whether that they can accurately describe the full picture. While these metrics are commonly used, they only provide a rough measurement of what is happening in an economy.
Gross Domestic Product (GDP) is commonly used to measure the …show more content…
However, trying to measure the wellbeing through GDP can be misleading as well. The measurement does not take into account of where the money is going to and the inequalities people face in the country. If all of the wealth is going to a small group of people, we cannot accurately measure wellbeing since we cannot determine how much of the goods or services produced reaching them. The more common method is measuring the GDP per person. It is the division of the GDP calculation by the population. It provides a measurement of how much each person would have produced if everyone in a county produced the exact same amount. It also would provide a basis to determine how equitable a country is by comparing the GDP per person to what is the actual division of …show more content…
Only using the GDP to consider if an economy is doing does not take into account how much a dollar is worth. If a currency was experiencing hyperinflation, it would appear as if a county was experiencing rapid economic expansion. In reality, products would be outrageous prices where only a very few could afford halting the economy to a standstill. As said in Cocktail Party Economics “The real enemy of money is inflation, especially deadly hyperinflation strain, inflation can take a perfectly reasonable bank note or bill and make it virtually worthless.” (pg.62). Trying to measure inflation, staticians use the consumer price index. The CPI gather serval commonly used items and measure the prices between years to determine how much a currency is worth by seeing how much it can afford. Issues with this measurement is accounting for what is a commonly used item as consumer preferences are varied. Another issue is accounting for technological change and how that effects what is included in the CPI. While new items can be more expensive, determining the benefits of the item is an important factor as well. The CPI in 1900 would be very different to the CPI in the year 2000 because of these factors.
In conclusion, while some of the metrics economist uses are flawed. They do provide generalizations to bases comparisons on. There are also other methods to help improve the reliability of data to make these metric more accurate such as the GDP per capita
Gross Domestic Product (GDP) is commonly used to measure the …show more content…
However, trying to measure the wellbeing through GDP can be misleading as well. The measurement does not take into account of where the money is going to and the inequalities people face in the country. If all of the wealth is going to a small group of people, we cannot accurately measure wellbeing since we cannot determine how much of the goods or services produced reaching them. The more common method is measuring the GDP per person. It is the division of the GDP calculation by the population. It provides a measurement of how much each person would have produced if everyone in a county produced the exact same amount. It also would provide a basis to determine how equitable a country is by comparing the GDP per person to what is the actual division of …show more content…
Only using the GDP to consider if an economy is doing does not take into account how much a dollar is worth. If a currency was experiencing hyperinflation, it would appear as if a county was experiencing rapid economic expansion. In reality, products would be outrageous prices where only a very few could afford halting the economy to a standstill. As said in Cocktail Party Economics “The real enemy of money is inflation, especially deadly hyperinflation strain, inflation can take a perfectly reasonable bank note or bill and make it virtually worthless.” (pg.62). Trying to measure inflation, staticians use the consumer price index. The CPI gather serval commonly used items and measure the prices between years to determine how much a currency is worth by seeing how much it can afford. Issues with this measurement is accounting for what is a commonly used item as consumer preferences are varied. Another issue is accounting for technological change and how that effects what is included in the CPI. While new items can be more expensive, determining the benefits of the item is an important factor as well. The CPI in 1900 would be very different to the CPI in the year 2000 because of these factors.
In conclusion, while some of the metrics economist uses are flawed. They do provide generalizations to bases comparisons on. There are also other methods to help improve the reliability of data to make these metric more accurate such as the GDP per capita