Measures of economic performance

GDP

The value of all final goods produced in an economy per year

Gives a measure of growth

Gives measure of living standards

Risk of double counting, this is when you include the value of the output in the primary sector and then include it again after the good has been manufactured into something in the secondary sector

Informal activity doesn't show up, for example firms that are not registered or black market goods

Errors are very likely to take place

Just looking at output doesn't look at quality or take into account negative externalities, for example the cost of air pollution or deforestation

Many other quality of life aspects that GDP doesn't take into account, for example good healthcare increases living standards but isn't taken into account when using GDP as a measure of living standards

GDP per capita

GDP / Population

GDP doesnt tell us anything about average level of individual incomes in an economy

GDP per capita measures the average level of individuals incomes in the economy

GNI

The total income generated by a countries factors of production regardless of where those FoP are located

Benifits of GNI

Factor income will be included, as long as its domestic

Income generated by workers working abroad will be counted

Domestic businesses income will be counted will be counted

FDI will not be accounted for in GNI as its not domestic factors of production

GNI = GDP + Net factor income

Still doesn't take into account externalities and environmental impacts of production

Drawbacks of GDP per capita

GDP per capita doesn't taking into account remittances

FDI can distort the final figure

Green GDP

A measure of GDP that accounts for the environmental costs of production

GDP - Environmental costs of production

Drawbacks of green GDP

Putting a monetary value on environmental cost is quiet difficult and very subjective

GDP could fall drematically