Question

“Higher Gross Domestic Product (GDP) always means higher per capita availability of goods in the economy.”

Defend or refute the given statement as the index of welfare of the people of that country.

Answer 1

The statement is not always true because a higher Gross Domestic Product (GDP) does not necessarily mean higher per capita availability of goods or greater welfare of people in an economy.

Refutation:

1. Income Inequality: If GDP growth benefits only a small section of society, per capita availability of goods may not increase for all.
2. Population Growth: A rising population may offset GDP growth, limiting per capita availability.
3. Inflation: If prices rise sharply, real purchasing power may not improve despite higher GDP.
4. Non-Market Transactions: GDP does not account for unpaid work like household labour, which contributes to overall well-being.
5. Environmental Degradation: Economic growth at the cost of environmental damage can reduce welfare in the long run.