Question

A century ago, gross domestic product of the United States came primarily from the production of tangible goods (a.k.a. manufacturing).  Today, GDP of the US is weighted heavily toward the production of services.  The basic issue on the table for discussion is whether this is a good thing.  Can standard of living in the United States, or any country for that matter, continually improve if aggregate production is composed of more and more services, and less and less manufactured goods?

1) Who should decide what gets produced and how economic resources should be allocated?  Keep in mind that the two general approaches for allocating economic resources are capitalism and socialism?

Answer 1

Ans

1 it is good. Generally as economies develop share of manufacturing falls in gdp and share of services rise. Both are productive activities and hence raise gdp. Hence standard of living can increase if Aggregate output consists of more and more of services. Usually production manufactured goods do not fall It increases in absolute amount but only its share in gdp falls

2 only market mechanism. Prices here act as incentives. This system has proved much successful than socialism