Question

GDP and GNP are useless measures as they can not capture the true well-being of a nation - do you agree or disagree? WHY?

Answer 1

GDP refers to the final value of goods and services produced within domestic territory or country border

GDP AND GNP are the measures to determine the economy's growth and development but they are not always a good measures to calculate the true well being of a nation.

GDP has certain limitations that makes it irrelevant for measuring economic welfare as -

1. It does not undertaken non -monetary transactions and only estimate monetary transactions.

2. It does not estimate the negatives and positive externalities that caused to harms or benefits to individual without being penalized.

3. GDP may indicate that the there is Increase in welfare but if it is not equitably distributed then a mere increase  in GDP may not be good indicator of Economic welfare.

GNP is different from GDP as it takes final value of goods and services produced by domestically owned mean of production that is it includes NFIA.

GNP is also used as a tool to measure economic welfare , like rise in Real GNP can be seen as an improvement in living standards but it is also not a perfect measure as it also has certain limitations like it

- does not undertake improvement in productivity or Improvement in quality of good.

- sometimes the recovery efforts would add to GNP but still the welfare of nation does not Improve.

- it doesn't account for charitable works .

Although GDP and GNP have certain limitations but still it is a useful tool in measuring output and overall demand of an Economy.