Identify 5 limitations of GDP as a measure of the standard of living.

Expert Solution

GDP is a valuable measurement of the economic health of a country, and it is the measure of well-being most widely used. It has some significant limitations, however, including:

Exclusion of sales that are non-market
The inability to account for the degree of income inequality in society or to reflect it
The inability to show whether or not the pace of growth of the country is sustainable
Failure to account for the costs of negative externalities resulting from the production or use of the nation's output levied on human health and the environment
Treatment of depreciated capital replacement in the same manner as the production of new capital

Rahul Sunny answered 2 years ago

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