Question

The GDP of the country of Sumeria has grown at an average rate of 6% over the last two years, while the rate of inflation has remained more or less stable. Macroeconomists in the country are arguing that this increase in GDP is a clear indication of an overall improvement in the well-being of its people.

Which of the following, if true about the last two years in Sumeria, would strengthen this argument?

Answer 1

The argument for GDP growth indicating improved well-being in Sumeria would be supported by a decline in infant mortality, a lower crime rate, and increased goods variety, alongside stable inflation. Sumeria's significant GDP growth suggests real progress, especially without rising inflation.

Step-by-step explanation:

The argument that an increase in GDP is an indication of an overall improvement in the well-being of the people of Sumeria would be strengthened if factors such as a decline in infant mortality, a lower crime rate, or an increase in the availability and variety of goods were also observed alongside the stable inflation rate. A decline in infant mortality, for example, is a direct indicator of improved health care systems and general living conditions, both of which are essential components of well-being. A lower crime rate implies a safer and more stable society, which contributes to a better quality of life for the residents. Lastly, the availability of a greater variety of goods improves consumer choice and satisfaction, which can reflect higher living standards.

Economic growth ultimately determines the prevailing standard of living in a country. In Sumeria, a GDP growth rate of 6% is significantly above the long-term average of 2-3% that is typically seen as good economic performance. Given that this growth has occurred without an accompanying increase in inflation, it suggests that the country's increase in production capacity is not just nominal, but is also real in terms of the broader economy.