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Gross Domestic Product Rise and Rise in the Well-Being of All People in That Nation

Gross Domestic Product

Gross domestic product means the gross market value of goods and services produced in a country during a particular year. It is one of the economic subjects. The GDP is calculated on the basis of adding export value with the consumer, investment, and government expenses and deduct the import value.

Economic Theory and well being

“According to the economic definition of well-being, higher levels of income are associated with higher levels of well-being. As income increases, a greater number of needs are satisfied (due to an increase in consumption) and a higher standard of wellbeing is attained.” (Fuentes and Rojas 2001). When income increases the human wants are satisfied and thus the consumption shows the increasing trend. Thus well being standard is also achieved together with increasing economic activities. The utility theory states that people are clearly identified about the collection of commodities and the function of the utility stage of the people is connected with achieving more favorite collections. This utility theory explains that the main aim of every individual is to maximize large utility level and they develop the budget constraints. Human wants are unlimited but resources are limited. This statement is also explained in this theory.

Another important economic theory and well-being is microeconomic theory. This theory shows the termination that well-being is raised with income. The main objective of economic policy is to develop the economy. Per capita income is also considered in the development of well-being.

The relation between social capital and the trends in economic well being:

The economic well being of a society is related to certain factors which are as follows:

“(1) effective per capita consumption flows,

(2) Net societal accumulation of stocks of productive resources,

(3) Income distribution, (as indicated by the Gini index of inequality, and depth and incidence of poverty); and

(4) Economic security (from unemployment, ill health, single parent poverty and poverty in old age).” (Osberg and Sharpe, p.1).

GDP growth rate

GDP growth rate is a very important point of the economy. The increasing GDP shows an increase in business and personal income. When the GDP is decreasing then the business will face loss and other problems. “The GDP growth rate is driven by retail expenditures, government spending, exports and inventory levels. Rises in imports will negatively affect GDP growth.” (Amadeo 2009).

GDP is the measurement of aggregate marketed income earned by society for a particular period of time. Trends in the average income of the individual

Advantages of selecting the GDP per capita as an indicator of the overall wellbeing of individuals are as follows

Two factors affecting the growth of GDP. That is working people are very large and the second reason is that the people working with more correctly and powerfully. An increase in GDP is differentiated on the basis of the short-run and long-run. In short run, when the rate of interest falls there is an increasing trend in GDP. It causes the new financing activities to obtain lesser financing costs. But in the long run, there is a lot of people working together and they introduce more products then the GDP also increases. In this case, the conclusion regarding the well-being of the individuals from the trend in the GDP per capita seems to be relevant.

Disadvantages of adopting GDP per capita as an indicator of trends in economic well being are discussed below

The well-being of society is greatly related to societal consumption and accumulation. The inequalities in the distribution of income have to be considered while determining the degree of relation between GDP and well-being. The intensity of poverty and inequality of income has a great influence on the well-being of society.

National income calculation does not consider the social well-being factors such as leisure time, length f life, etc. When considering the well-being of the individuals these factors are relevant. GDP per capita only took into account the economic trends. The aggregate value of economic output in a country does not indicate the real position of the economic well-being but sometimes the GDP growth rate is treated as the economic well-being indicator. The factors considering the social capital are not relevant for GDP measurement. In order to make a conclusion regarding the economic and social well-being of individuals in a complex society, a sequence of ethical and statistical judgments is essential. The well-being of society has different dimensions and its value depends on the perceptions of the observers.

The earnings from underground activities are not considering while calculating the GDP per capita. Increased life expectancy is an indicator of the well-being of the society but it is not considered in GDP calculation.

Economic activities for intermediate inputs are not significant for the economic well-being of the individual even though they taken in the GDP per capita calculation. Differences in the working hours in different countries and such type differences should affect the well being of individuals. Increased working hours will contribute to economic growth whereas the well-being of the individuals should be diminished. Leisure time activities are not providing economic value but having well-being power. “GDP includes only goods and services produced within the geographic boundaries of the U.S., regardless of the producer’s nationality.” (GDP: Definition 2009).


The economic trends in Canada over the past years can be taken as the best example for indicating the relation between trends in GDP and economic well-being. In Canada, over the past 25 years, the overall growth in the financial position of the citizens is of less than half of their parent’s generation. When taking the GDP growth rate, it can see that there is an increase of real per capita GDP for the country of approximately 60% for the period. This shows that national income accounting should not be a reliable tool for measuring the trends in economic well-being. In the case of UK and Sweden and Norway the GDP per capita increasing, economic well-being of individuals seems to be declining. The standard of the index of well-being such as poverty rate is of increasing even though the GDP per capita is showing an increasing trend. In Norway, the trend in the economic well-being of the individuals is showing a lower degree of correlation with the GDP growth rate.

GDP “is merely a gross tally of products and services bought and sold, with no distinctions between transactions that add to well-being, and those that diminish it. Instead of separating costs from benefits, and productive activities from destructive ones, the GDP assumes that every monetary transaction adds to well-being, by definition.” (What is wrong with the GDP?).


The discussion on the relation between GDP growth rate and well being of the citizens in the nation reveals that the increasing trend in the GDP per capita is not a reliable indicator of the economic and social well-being of the citizens. The degree of correlation between the GDP growth rate and the improvement in well being of the citizens is based on certain relevant factors in the economy such as disparity in the income distribution, working hours, the inflation rate in the economy, etc. In the calculation of GDP, some social well-being factors seem to be negatively related. Thus it can state that the GDP growth rate of a country is not representing the social well being exists in the country. The increase in the GDP cannot be considered as an increase in the well-being of the citizens in the country.


Amadeo, Kimberly 2009, What is the difference between GDP and growth rate? US Economy.

Fuentes, Nicole and Rojas, Mariano 2001, Economic theory and subjective well-being: Mexico, The Netherlands, Marzo: Social Indicators Research, Kluwer Academic Press, Web.

GDP: Definition 2009,, Web.

Osberg, Lars and Sharpe, Andrew. Comparisons of trends in GDP and economic well-being – the impact of social capital, p. 1.

What is wrong with the GDP? Society for Human Economy, 2009, Web.


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