Question

Increases in real GDP are often interpreted as increase in welfare. What are some problems with this interpretation? What do you think is the biggest problem with it, and why

Answer 1

Answer:

•Some outputs are measured poorly because they are not traded for in the market.

•It is difficult to account correctly for improvement in quality of goods

•It does not speak about the distribution of income.

•It does not account for rise population. Per capita income must increase to improve welfare of people.