What are the pros and cons of GDP in production and welfare?

The pros of a higher GDP include an increase in consumer purchases and in investment in public services, and decreases in unemployment. The cons of a higher GDP include inflation, economic recession, negative environmental effects, and account deficits.

Expert Answers

An illustration of the letter 'A' in a speech bubbles

Gross Domestic Product (GDP) can be defined as the monetary value of goods and services produced within a market in a certain timeframe. An increase in GDP also means an increase in economic growth. Economic growth usually coincides with an increase in average employment wage rates and a decrease in unemployment rates.

The benefits of an increase in GDP include:

  1. Increase in consumer purchases. An increase in goods and services means that consumers have more options available to them for purchase. Due to the likelihood of higher wages and decreased unemployment, consumers will purchase more.
  2. Increased investment in public services. Lower unemployment and higher wages mean that the government is able to collect more taxes. The increase in tax money allows government to invest more into community causes and public services.
  3. Decrease in unemployment. An increase in production also means more jobs are created, resulting in a decrease in unemployment.

The disadvantages of an increase in GDP include:

  1. The possibility of inflation or economic recession. The increase in production and economic boost will not last long-term, resulting in an economic downturn and an unsustainable increase in the costs of goods and services.
  2. Negative effects on the environment. An increase in production could mean the potential for increased pollution and consumption of non-sustainable products.
  3. Account deficits. The occurrence of imports could potentially exceed the occurrence of exports, resulting in an imbalance of accounts for the nation.

See eNotes Ad-Free

Start your 48-hour free trial to get access to more than 30,000 additional guides and more than 350,000 Homework Help questions answered by our experts.

Get 48 Hours Free Access
Approved by eNotes Editorial Team