Explain how our standard of living depends upon our level of real GDP per person, but there might not be a one-to-one relationship between the standard of living and real GDP per person. Give examples of things that can affect one, but not the other

What will be an ideal response?

Although GDP has a significant impact on our standard of living, it is not a perfect measure of the standard of living. GDP omits some factors that affect our standard of living. GDP does not include household production, all the tasks performed around the house. It omits underground production, the part of the economy hidden from the government. Real GDP does not include the value of people's leisure time. And, GDP does not make allowances for environmental quality, health and life expectancy, or political freedom and social justice. All of these factors influence the quality of our life and hence our standard of living. Indeed, occasionally a change will affect GDP and the standard of living in different directions. For instance, if people decide they want more leisure and hence retire early, GDP will decrease because fewer people are working, but the standard of living will increase. Or, if there is an increase in production that creates massive amounts of pollution, GDP increases even though the standard of living likely decreases.