PrepTest 33, Section 4, Question 1

Many political economists believe that the soundest indicator of the economic health of a nation is the nation's gross national product (GNP) per capita�a figure reached by dividing the total value of the goods produced yearly in a nation by its population and taken to be a measure of the welfare of the nation's residents. But there are many factors affecting residents' welfare that are not captured by per capita GNP; human indicators, while sometimes more difficult to calculate or document, provide sounder measures of a nation's progress than does the indicator championed by these economists. These human indicators include nutrition and life expectancy; birth weight and level of infant mortality; ratio of population level to availability of resources; employment opportunities; and the ability of governments to provide services such as education, clean water, medicine, public transportation, and mass communication for their residents.

The economists defend their use of per capita GNP as the sole measure of a nation's economic health by claiming that improvements in per capita GNP eventually stimulate improvements in human indicators. But, in actuality, this often fails to occur. Even in nations where economic stimulation has brought about substantial improvements in per capita GNP, economic health as measured by human indicators does not always reach a level commensurate with the per capita GNP. Nations that have achieved a relatively high per capita GNP, for example, sometimes experience levels of infant survival, literacy, nutrition, and life expectancy no greater than levels in nations where per capita GNP is relatively low. In addition, because per capita GNP is an averaged figure, it often presents a distorted picture of the wealth of a nation; for example, in a relatively sparsely populated nation where a small percentage of residents receives most of the economic benefits of production while the majority receives very little benefit, per capita GNP may nevertheless be high. The welfare of a nation's residents is a matter not merely of total economic benefit, but also of the distribution of economic benefits across the entire society. Measuring a nation's economic health only by total wealth frequently obscures a lack of distribution of wealth across the society as a whole.

In light of the potential for such imbalances in distribution of economic benefits, some nations have begun to realize that their domestic economic efforts are better directed away from attempting to raise per capita GNP and instead toward ensuring that the conditions measured by human indicators are salutary. They recognize that unless a shift in focus away from using material wealth as the sole indicator of economic success is effected, the well-being of the nation may be endangered, and that nations that do well according to human indicators may thrive even if their per capita GNP remains stable or lags behind that of other nations.

Many political economists believe that the soundest indicator of the economic health of a nation is the nation's gross national product (GNP) per capita�a figure reached by dividing the total value of the goods produced yearly in a nation by its population and taken to be a measure of the welfare of the nation's residents. But there are many factors affecting residents' welfare that are not captured by per capita GNP; human indicators, while sometimes more difficult to calculate or document, provide sounder measures of a nation's progress than does the indicator championed by these economists. These human indicators include nutrition and life expectancy; birth weight and level of infant mortality; ratio of population level to availability of resources; employment opportunities; and the ability of governments to provide services such as education, clean water, medicine, public transportation, and mass communication for their residents.

The economists defend their use of per capita GNP as the sole measure of a nation's economic health by claiming that improvements in per capita GNP eventually stimulate improvements in human indicators. But, in actuality, this often fails to occur. Even in nations where economic stimulation has brought about substantial improvements in per capita GNP, economic health as measured by human indicators does not always reach a level commensurate with the per capita GNP. Nations that have achieved a relatively high per capita GNP, for example, sometimes experience levels of infant survival, literacy, nutrition, and life expectancy no greater than levels in nations where per capita GNP is relatively low. In addition, because per capita GNP is an averaged figure, it often presents a distorted picture of the wealth of a nation; for example, in a relatively sparsely populated nation where a small percentage of residents receives most of the economic benefits of production while the majority receives very little benefit, per capita GNP may nevertheless be high. The welfare of a nation's residents is a matter not merely of total economic benefit, but also of the distribution of economic benefits across the entire society. Measuring a nation's economic health only by total wealth frequently obscures a lack of distribution of wealth across the society as a whole.

In light of the potential for such imbalances in distribution of economic benefits, some nations have begun to realize that their domestic economic efforts are better directed away from attempting to raise per capita GNP and instead toward ensuring that the conditions measured by human indicators are salutary. They recognize that unless a shift in focus away from using material wealth as the sole indicator of economic success is effected, the well-being of the nation may be endangered, and that nations that do well according to human indicators may thrive even if their per capita GNP remains stable or lags behind that of other nations.