... rise in price is far lower than the improvement in the quality of service, and it can be argued that the service is even worse now! However, some inflation is due to genuine developments in the quality of the produced goods and this could lead to an exaggeration of inflation. Production does not fundamentally mean consumption. For example, if millions of pounds are invested into the building of a new school, the GDP figure will rise. However, the investment will not lead to the society benefiting from the school straight away as it will take a few years to build. So it would be wrong if we thought that the rise in GDP here increased the current living standards. Nevertheless it will raise future standards. Another example of this problem is when GDP rises due to an increase in exports. This is because when there are exports, it is the ...

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