Why is GDP not a good measure?

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Why is GDP not a good measure?

Gross Domestic Product, otherwise known as GDP, is one indicator for the value of all goods and services sold in the market found in a certain specific country over a period of time. Gross Domestic Product is a term used in referring to a country’s standard of living. As first developed by Simon Kuznets in 1934, he initially gave the measurement’s limitations regarding its use. Economic experts have introduced three methods of arriving at the Gross Domestic Product. Income approach, expenditure approach and product or output approach are the three mechanisms of which the same GDP value can be achieved. Following its corresponding formulas, the Gross Domestic Approach is one basis that determines the national economic activity performed by a country. As a gauge to the health of the economy of a country, Gross Domestic Product is obtained with the aim of sustaining ecological status even in a state of unexpected changes in human’s standard of living.
However, many economic experts argue that the Gross Domestic Product is not a good measure for a country’s economic health. One reason is that GDP does not adequately measure wealth distribution among inhabitants of a country. Another reason is that transactions made outside the context of the country’s market are not included in the GDP computation. More so, GDP does not take into account non-monetary business transactions, thereby acquiring inaccurate results. Many economists also discovered that Gross Domestic Product ignores damages and losses that have effects towards a country’s economy. It does not measure the how a country’s economy projects to the country per se. Instead, it only measures how the country performs in a country. Therefore, the Gross Domestic Product was found to be ineffective and not a good measure in a country’s economic status.

Author: plaza

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