Question

"I just heard on the news that GDP is higher this year than it was last year. This means that we're better off this year than last year." Comment.

Short answer

While a higher GDP indicates economic growth, it doesn't necessarily mean that we're better off this year than last year, as GDP doesn't account for various factors like wealth inequality, environmental degradation, unpaid work, and overall quality of life.

Step-by-step solution

Understanding GDP

Gross Domestic Product (GDP) is the total market value of all final goods and services produced in a country in a given year, often used as an economic growth indicator. GDP is calculated using the expenditure, income, or output approach.

Understanding what GDP does not account for

While GDP is a measure of economic activity, it doesn't account for various factors like wealth inequality, environmental degradation, unpaid work, and overall quality of life. Hence, a higher GDP doesn't necessarily imply a better quality of life for the general population.

Interpreting the news

In this case, although it's stated that the GDP is higher than the previous year, it doesn't provide evidence on which sectors contributed to this growth, how the GDP per capita has changed, or how income inequality or quality of life may have been affected in the process. Thus, we cannot conclusively say if we are 'better off' this year compared to last year, based purely on the increase in GDP.