Drawbacks to GDP

Drawbacks to GDP - Drawbacks to GDP The use of GDP as a...

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Drawbacks to GDP: The use of GDP as a measure of economic welfare and well-being has been criticized because of: (*Important when asked to explain situations on tests and exams when looking at an economy’s stats, to say remember: it would be better if we took into account the population size, etc) o Population Size Comparing the GDP for different years can be misleading if the population of the country has changed significantly Ex. If GDP has grown by 5% it may seem to have a substantial growth, but if the population has grown by 7% then the output is actually less per person A better indicator is per capita GDP o Non-Market Production GDP does not count output that has no dollar value Ex. Contribution that people make create output by renovating their homes or voluntary services to charitable organizations o Underground Economy “Under-the-table” transactions that occur to avoid paying taxes Statisticians have estimated that these activities would add 3-20%
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Drawbacks to GDP - Drawbacks to GDP The use of GDP as a...

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