Country's Standard of Living depends on its Ability to Produce Goods and Services~

The standard of living of a country depends on its ability to produce goods and services. This principle does truly relates to everyday life of everyone. For a clear and wide picture for this assignment, key words are need to be determined. Difference in the standard of living is strongly linked to differences in productivity. Productivity is affected by the level of investment undertaken in an economy, and level of investment is affected by government policies (Mankiw, 2009).


China is chosen to be related for this assignment. Government of China implements policies that are fully democracy, pursue economic development and improve people's lives. These policies do success and lead to economic growth of China as a whole (Jiabao,2011). In addition, China's economy even surpassed Japan, become the second largest in the world (Hughes, 2011).


With such brilliant implementation of government policies, it enhances the level of investment undertaken in China's economy. People around the world tend to invest in China as the government policies attract them to do so. They believe the ongoing growth in business sectors for goods and services. Therefore, China has one of the highest investment rates in the world -- over 40 percent of its GDP in recent years (Bai, Hsieh and Qian, 2011).


Hence, investors with lots of money invest in China will improve the productivity. Productivity is the quantity of goods and services produced from each hour of a worker's time (Mankiw, 2009). The business sectors are now about to hire more labor forces to increase productivity to produce goods and services as they have available money from the investors to do so. From Appendix 1 and 2, it can be clearly seen that the production of oil and natural gas in China increased over these 10 years. Apart from that, appendix 3 and 4 which shows increases in export and low unemployment rate over these 10 years also indirectly do support the increases in productivity of China over these 10 years. Furthermore, the article even indicates that there is nothing that China cannot produce nowadays (Hoffman, 2011).


After all, China is really an impressive and developing country that has huge productivity nowadays. This phenomenon leads to the final stage of this principle, which is the increase of standard living as well. Standard of living can be determined by the GDP per capita, which shows the average annual income of the citizens. From Appendix 5, there is no doubt that GDP per capita of China has grown rapidly from year 2008 to 2011. With higher income, people are able to spend more freely and are able to purchase more goods and services, which specify that their standards of living are increasing. This is based on the concept of circular-flow diagram as income equals to expenditure (Mankiw, 2009).


As a conclusion, China will grow continuosly if it fulfills all the stages in the principle above. Although GDP per capita is not a perfect measurement of standards of living as it does not measure the happiness of population, income earn from other illegal activities, and health or life expectancy, it is till the best as there are no other aptitude that can describe the standard of living better.


As a result, every country does depend on this principle to improve the standard living of everyone's daily life.

Appendix 1

Appendix 2

Appendix 3

Appendix 5