Lost+decade?+We've+already+had+one+-+Kevin+Miao

= Title of Article: Lost decade? We’ve already had one = = Source: http://finance.fortune.cnn.com/2011/04/20/lost-decade-weve-already-had-one/  = = Date: April 20, 2011  = = = = Explanation: This article talks about how the most popular economic indicator, gross domestic product, does not do a good job of showing the current state of the economy. In the article it says that the recent downfall of the US economy began not a few years ago, but a decade ago. People did not notice because of GDP’s representation of measuring only consumption. Any form of spending in the economy is accountable in the GDP, which does not make this suitable for the main measure of economic development. Most people think that the higher the GDP a country has, the more economically developed it is. The article stated that real GDP has risen in less than a third of the rate at which debts owed by US public and private sectors have grown. This means that as market debts increase over the years, GDP increases at a rate that is not very noticeable or enough to look like a difference. And since real GDP has not risen by much, this means that the nominal GDP has not largely changed either. If the nominal GDP or real GDP does not have a noticeable shift, this means that prices have not changed either. The article’s solution for this unreliable measurement is to take out the debt-financed consumption, called structural GDP, or to take out government spending, called private sector GDP. = = = = Vocabulary:  = = · GDP – total value of all spending in an economy = = · GDP per capita – total GDP divided by the size of the population = = · Nominal GDP – value at current prices = = · Real GDP – nominal GDP adjusted for inflation to get GDP at constant prices = = · HDI – Human development index measures three basic goals of development: health, education and standard of living = = · GPI – Genuine progress indicator’s factors include household economy and defensive expenditures add to well-being, while crime subtracts from well-being = = = = Evaluation: I agree with some parts of this article because it points out the many flaws of using GDP to measure economic development. The main point they make is that GDP takes in all forms of consumption in the economy, including debt-financed consumption. This adds to GDP, but gives a negative effect to our economy. The entire US economy was hurt by GDP because people were not aware of the current economy’s state. In the article it even states that most of the GDP gains in the past decade have come from debt-financed spending, rather than real wealth creation. However, instead of working around GDP and trying to solve the problem by using a different form of GDP is not the best choice they can make. There are many other measurements that represent a country’s economic development better than GDP, such as HDI or GPI. However, since more and more people are beginning to realize that GDP is an unreliable measurement for economic development, people will try to find ways to be more aware of their current economic state in the future. =