Answer to Question #235676 in Macroeconomics for Ali Hashim

Question

Robert Kennedy’s remarks about the shortcomings of measures of national output also contained the following: “The Gross National Product includes air pollution and advertising for cigarettes, and ambulances to clear our highways of carnage. It counts special locks for our doors, and jails for the people who break them. GNP includes the destruction of the redwoods and the death of Lake Superior.” List ways that the accounts can be redesigned to incorporate these effects.

Answer 1

As per the remarks made by Robert Kennedy, there are few shortcomings in terms of measurement of the national output.

The existing method of measuring the national income are based on different approaches: 

1. Income approach

2. Expenditure approach

3. Product approach

If we want to incorporate the shortcomings, the following should be in place:

1. To focus on improving the infrastructure and invest in such projects

2. To focus on skill improvement and invest in school, collages and Universities

3. To avoid wars, in a way cutting down the expenditure

4. To improve health standard, by investing in hospitals and healthcare

5. Setting up policies around family planning and encourage marriages