Gross Domestic Product (GDP) And The Factors Affecting It

The economy and development of a nation is measured through the Gross Domestic Product.  It is the measurement of the total value of financial productivity in a country irrespective of the sources of production. All the home industries and the cross border industries which are setup inside a country contributes to the GDP of the nation. The factors that are involved in the tracking of a nation’s GDP are consumption, investment, trade with other nations, and the overall international market. The GDP represents the total dollar value for all the goods and services produced over a specific period and gets compared to its previous quarters. A nation with good GDP attracts more companies and generates more profit in the stock market.

Let us take a look at the factors which affect the GDP of a nation.

Leisure Preference

We have advanced through the ages to build machines and systems for the industries that productivity has reached new heights and requires minimum efforts. The ease in the workload has given confidence to workers to explore out more ways to reduce the workload. This has given the workers the chance to find more time for themselves to get involved in leisure activites. However, the time spent on such activities rather on work does not reflect in a  nation’s GDP. The GDP of the nation only measures the production, and the more time spent on doing other things will automatically bring a significant change in the GDP of a nation.

 

Non- Market Activities

The unpaid and volunteered service does not count in the GDP of a nation. All the unofficial activities performed by the industries and government such as NGOs, nursing, free education does not contribute to GDP in any way even though it consumed the resources of the nation. Also, the workers like plumber, private drivers, house cleaners, etc. do not count in the tracking of GDP unless they are performing under a legal organization. These factors however do not damage the economic record for the country, but they are not even getting noticed under the GDP for a country which affects the tracking tremendously.

Underground Economy

Many activities inside a nation take place unofficially. The legal and illegal activities are both involved in raising the underground economy. Organized crimes such as dealing of illegal products, illegal occupation of lands in remote areas, child care and NGOs contribute to the underground economy of a nation, and it does not get recorded in the GDP of the nation.

NGOs contribute

Poverty and Economic Inequality

The economic stability of a nation is dependent on the per capita income. As the per capita rises the cost of living also increases, making it difficult for lower class people to deal with their expenses. This results in the increase of people in below poverty line. The inequality in income has been increasing in most developing nations. But GDP measures only the production of goods and not its consumption. So the GDP can be inaccurate in depicting the growth of a nation as two nations can have the same production rates but can differ by a huge margin on the equal consumption of those resources.