The paper "Effect of an Inflation Target in Monetary Policy Rule" is a great example of an assignment on macro and microeconomics. The national total income and output measures in a given one year period are considered as Gross Domestic Product (GDP). It relatively measures wealth, prosperity, and both the growth or decline of the economy in a specific country. Gross Domestic Product has advantages as well as disadvantages in economic perspective. These strengths and weaknesses include; Advantages of Gross Domestic Product GDP provides the best analysis of measuring the economic activities in growth rate and changes experienced in the economy (Tommy & Lutz, 2013). Policymakers and economics analysts use it to guide, adjust, and implement economic policies. It is used as a measure of business performance as it provides useful information for both government and business. In measuring the social and economic welfare, GDP guides the economists with information to compare different sectors performances. It is the best economic tool that is used in comparing different countries' performance in development and growth. Disadvantages of Gross Domestic Product GDP does not provide accurate economic development and growth as it does not cover non-market activities (Tommy & Lutz, 2013). It does not include and reflect the domestic household product or even the black market. GDP does not express whether the national wealth is equally distributed. Its measures of expenditures do not relate to economic welfare (Matt, 2013). It does not account for the quality of goods and services (Mankiw, 2012). Alternative Gross Domestic Product measures Index of Sustainable Economic Welfare (ISEW): This is an economic indicator that focuses on more details beyond the Gross Domestic Product.
This factor includes income distribution and unsustainable costs such as cost associated with pollution (Richard & Kevin, Jan 2016). Human Development Index (HDI): It is a comparative measure that deals with measuring the wellbeing of people.
It focuses on distinguishing whether a country is in categories of under-developed, developing, or developed and measuring the economic impact of policies relating to the quality of life. HDI rank a country’ s economic performance regarding human development rather than relying on GDP and other economic factors only (Philip, 2013).
Graeme, W., & Helen, S. (2015). Australian government budget balance numbers. Accounting
Research Journal. Vol. 28 Issue 2, 120-142.
Mankiw, G. (2012). Principles of macroeconomics. Mason, OH: South-Western Cengage
Matt, W. (2013). Principles of Macroeconomics. American Journal of Agricultural Economics.
Jan, Vol. 95 Issue 1, 200-201.
Philip, L. (2013). The failure of the ISEW and GPI to fully account for changes in human-health
capital — A methodological shortcoming not a theoretical weakness. Ecological
Economics. Vol. 88, 167-177.
Richard, H., & Kevin, K. (Jan 2016). Economic growth, inequality, and well-being. Ecological
Economics. Vol. 121, 231-236.
Stiglitz, J., Walsh, C., Guest, R., & Tani, M. (2014). Introductory Macroeconomics. 1st
Australian Edition: Wiley.
Tommy, S., & Lutz, W. (2013). The Taylor principle in a medium-scale macroeconomic model.
Journal of Economic Dynamics & Control. Dec, Vol. 37 Issue 12, 3034-3043.