limitations of gdp

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Limitations of GDP

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Limitations of GDP

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Page 1: Limitations of GDP

Limitations of GDP

Page 2: Limitations of GDP

An environmentally damaging practice that can diminish a natural resource thus negating the continued use or availability of that resource.E.G 1.1. China fishing industry- One of the largest fishing

industries in the world.2. 2005 – Aquaculture harvest was 32.4million tonnes.3. Exports valued at $7.7billion US.4. UN FAO – estimated 70% of the fish population is fully

used or in crisis.

1. Unsustainable practises

Page 3: Limitations of GDP

E.G 2. Fossil fuel consumption

1. Limited supply2. Mass consumption of cheap fossil fuels3. Saudi Arabia – worlds largest oil producer approaching

end of production4. Replenishment rate of fossil fuels takes millions of

years

1. Unsustainable practises

Page 4: Limitations of GDP

32,400,000-22,680,000 9,720,000 tonnes

China fishing industry 7,700,000,000-5,390,000,000$2,310,000,000 US

-70%

Page 5: Limitations of GDP

The sum of all goods and services which are produced

by a country in a given period of time. Bad composition of GDP – how diversified the

production within an economy is.E.G 1.1. Saudi Arabia 2009: Agriculture – 3.2%

Services – 36.4% Industry – 60.4%

2. Petroleum & petroleum products made up 90% of total exports.

2. Bad composition of GDP

Page 6: Limitations of GDP

E.G 2.1. Mozambique 2007: Industry – 8%

Services – 15% Agriculture – 77%

2. Main exports include: Cotton, sugar, cashews and citrus.

2. Bad composition of GDP

Page 7: Limitations of GDP

Transactions which producers provide to people for free or at economically insignificant prices.E.G 1.1. Second hand sales – old equipment, vehicles,

un-used stock. E.g. Bus van = €25,000 – annual depreciation 20%

Value after 3 years = €10,000Sold for €9,500

Non-production transactions

Page 8: Limitations of GDP

E.G 2.1. Transfer payment – social welfare,

unemployment benefits, pension.2. 2012 – 1.469million people in receipt of a

weekly welfare payment.3. 2012 expenditure - €20.774billion4. Decrease of 0.9% over 20115. Not counted as it is money transferred rather

than paid for products or services.

Page 9: Limitations of GDP

The unequal distribution of household or individual income across the various participants in an economy.1. E.g. 70% of the total income is controlled by

20% of the population.2. Overall wealth of a country is primarily

determined by the larger income of the minority of the population.

Income inequality

Page 10: Limitations of GDP

E.G 1.1. Gini coefficent - measures degree of

inequality in distribution of income in a country.

2. 0=perfect equality, 1=perfect inequality3. 2011 EU average = 30.74. 2011 – Ireland rank 20 – 31.15. Norway rank 1 – 22.9

Page 11: Limitations of GDP

E.G 2.Saudi Arabia 1. Oil industry 2012 - $300billion2. Population – 28million3. ¼ of population on or below poverty line4. Estimated 2-4million natives live on less than

$530 a month - $17 a day5. King Abdullah's personal fortune at $18bn

Page 12: Limitations of GDP

Population

China

20121. Population – 1.351

billion2. GDP – 8.227trillion

(USD)3. Per capita – 6,091.01

Switzerland

20121. Population –

7.997million2. GDP – 632.2billion (USD)3. Per capita – 79,052.34

Page 13: Limitations of GDP

Underground economy – any economic activity that takes place outside of government control.Annual cost Ireland - €6.1billionE.G 1.1. Construction industry – cash only/cash in-

hand, no VAT2. Legitimate contractors- €250m to €500m

back into the industry

6. Black economy

Page 14: Limitations of GDP

E.G 2.1. Tobacco industry - €3 million per week from

illegal tobacco.2. 2011- 15% of smokers consuming illegal

cigarettes3. 2012- 95.6 million cigarettes seized valued at

€43.3 million

6. Black economy

Page 15: Limitations of GDP

Unemployment1. Ireland 2013 – 13.3%2. 2012- 1.469million people in receipt3. 2012 social welfare - €20.774billion4. Budget 2014 – Job seekers allowance 14 Jan:

- No children, aged 18-24 = €100 per week-No children, aged 25 = €144 per week-Aged 26 increase = €188 per week

B. ii)Economic effects of black market in

Ireland

Page 16: Limitations of GDP

5. High unemployment benefits – beneficial to

remain unemployed and continue to claim benefits, rather than work for a lower wage.

6. Nixers- people working off the books, cash in hand, continue to claim unemployment benefits.

B. ii)Economic effects of black market in

Ireland

Page 17: Limitations of GDP

Lost tax revenueCigarette smuggling1. Annual government loss - €937million lost tax

revenue.2. Retailers - €537million, job losses.3. 32.8% discarded cigarette packs are non-

domestic.4. Ireland – largest smoker of smuggled

cigarettes in entire EU 2012

B. ii)Economic effects of black market in

Ireland

Page 18: Limitations of GDP

5. Ireland 2013 – most expensive price per pack

of 20 cigarettes in Europe.6. Retail price - €9.50 per pack7. Collected tax - €7.728. Illegal cigarettes purchased - €0.50c per pack9. Selling price - €4.5010.Difference - €5.00

B. ii)Economic effects of black market in

Ireland