Answer to Question #278156 in Macroeconomics for Nish

Question

Analyze the impact of insurance sector on Gross Domestic Product (GDP) and

financial health of an economy. Also explain why focussing simply on GDP can be harmful

for economic development of a country.

Answer 1

insurance sector development positively and significantly affects economic growth. Insurance increases GDP as well as improving the financial health of the economy.

Environmental degradation is a huge externality that GDP has failed to portray. GDP also fails to describe the distribution of income across society, which is becoming increasingly important in today's world as inequality levels rise in both developed and developing countries.