Uni of Law 2018/19
Law & Business Case Study for MSc Law, Business and MNGMT
Case Study 1
QUESTION 1
OT’s website contains thought leadership articles. The website contains a column on
current business news relevant to the clients it serves. You have been asked to draft a
piece for inclusion in the business news column. Please discuss what Gross Domestic
Product (GDP) is and to what extent it is a reliable indicator of the health of the
economy. (25 marks)
1. The Reliability of GDP as an Indicator of Economic Health
1.1 Gross Domestic Product- What Is It?
Gross Domestic Product (GDP) measures the monetary value of all the finished goods and
services produced in a country within a period of time. 1 It is considered the primary indicator
of the economic health of a country.2 Yet, GDP only measures the size of the economy. Like
a car’s speedometer, it shows how fast the economy is growing but it does not indicate
whether it is heading in the right direction. 3 This article will explore the shortcomings of
GDP as a reliable indicator of a country’s economic health.
1.2 The Unreliability of GDP
GDP is composed of personal consumption expenditures, business investment, government
spending and net exports.4 GDP has some merit as an indicator, as these factors do contribute
to a country’s economic success. However, there are many other factors that GDP neglects in
its calculations. It is this limited view of the factors of economic success that contribute to the
unreliability of GDP as an all-encompassing indicator of a country’s economic prosperity.
GDP fails to account for: all types of productive activity, depreciation, quality of life,
environmental sustainability and wealth distribution, to name a few of its shortcomings.
1.2.1 GDP Does Not Include All Productive Activity
1
Jim Chappelow, 'Gross Domestic Product (GDP)' (Investopedia, 11 April 2018)
<https://www.investopedia.com/terms/g/gdp.asp> accessed 26 March 2019
2
Leslie Kramer, 'What is GDP and Why is It So Important to Economists and Investors?' (Investopedia, 21
February 2019) <https://www.investopedia.com/ask/answers/what-is-gdp-why-its-important-to-economists-
investors/> accessed 26 March 2019
3
Stewart Wallis, 'Five measures of growth that are better than GDP' (World Economic Forum, 19 April 2016)
<https://www.weforum.org/agenda/2016/04/five-measures-of-growth-that-are-better-than-gdp/> accessed
26 March 2019
4
Kimberly Amadeo, 'Gross Domestic Product and How It Affects You' (The Balance, 16 April 2018)
<https://www.thebalance.com/what-is-gdp-definition-of-gross-domestic-product-3306038> accessed 26
March 2019
1
Law & Business Case Study for MSc Law, Business and MNGMT
Case Study 1
QUESTION 1
OT’s website contains thought leadership articles. The website contains a column on
current business news relevant to the clients it serves. You have been asked to draft a
piece for inclusion in the business news column. Please discuss what Gross Domestic
Product (GDP) is and to what extent it is a reliable indicator of the health of the
economy. (25 marks)
1. The Reliability of GDP as an Indicator of Economic Health
1.1 Gross Domestic Product- What Is It?
Gross Domestic Product (GDP) measures the monetary value of all the finished goods and
services produced in a country within a period of time. 1 It is considered the primary indicator
of the economic health of a country.2 Yet, GDP only measures the size of the economy. Like
a car’s speedometer, it shows how fast the economy is growing but it does not indicate
whether it is heading in the right direction. 3 This article will explore the shortcomings of
GDP as a reliable indicator of a country’s economic health.
1.2 The Unreliability of GDP
GDP is composed of personal consumption expenditures, business investment, government
spending and net exports.4 GDP has some merit as an indicator, as these factors do contribute
to a country’s economic success. However, there are many other factors that GDP neglects in
its calculations. It is this limited view of the factors of economic success that contribute to the
unreliability of GDP as an all-encompassing indicator of a country’s economic prosperity.
GDP fails to account for: all types of productive activity, depreciation, quality of life,
environmental sustainability and wealth distribution, to name a few of its shortcomings.
1.2.1 GDP Does Not Include All Productive Activity
1
Jim Chappelow, 'Gross Domestic Product (GDP)' (Investopedia, 11 April 2018)
<https://www.investopedia.com/terms/g/gdp.asp> accessed 26 March 2019
2
Leslie Kramer, 'What is GDP and Why is It So Important to Economists and Investors?' (Investopedia, 21
February 2019) <https://www.investopedia.com/ask/answers/what-is-gdp-why-its-important-to-economists-
investors/> accessed 26 March 2019
3
Stewart Wallis, 'Five measures of growth that are better than GDP' (World Economic Forum, 19 April 2016)
<https://www.weforum.org/agenda/2016/04/five-measures-of-growth-that-are-better-than-gdp/> accessed
26 March 2019
4
Kimberly Amadeo, 'Gross Domestic Product and How It Affects You' (The Balance, 16 April 2018)
<https://www.thebalance.com/what-is-gdp-definition-of-gross-domestic-product-3306038> accessed 26
March 2019
1
