Question

What are the limitations to using GDP as a measurement of how efficiently an economy is growing? Identify two recent events that will likely distort how well the official measurement of Gross Domestic Product represents the standard of living. Explain how the event is considered, or not considered, in the measurement. The two events must be from within the last 3 months.

Answer 1

Limitations of GDP :

• GDP does not incorporate any measures of welfare
• GDP only includes market transactions
• GDP does not describe wealth distribution
• GDP does not describe what is being produced

The two recent events were unpaid labor and wage distribution.

Over 51% of the work done by women is unpaid, and is not counted in the nation’s GDP and other statistics and 66% of women's work in India is unpaid.

India women from affluent families are often restricted from joining the workforce in the name of culture and tradition, while poorer women are forced to shoulder the double burden in order to sustain their livelihoods.

The possibility that a large share of the gains in real GDP per capita will go to a relatively small percentage of the population means that average individuals are not as well off as the data would otherwise suggest and for Example,Jan 2018

73% wealth is concentrated at 1% Indians i.e., 1% earn 22% of national income of India.

GDP doesn't give accurate scenario of wealth distribution.

Where the two were not considered in the measurement and gives calculations on a pan scale which these doesn't include them.