Question

Limitations of gdp concept as a measure of social welfare

Answer 1

Limitations of GDP as Welfare Indicator. GDP (and its derivatives) is ameasure of economic activity, actually. Narrowly understood economic activity, one should add. ... Therefore, we allegedly can use GDP per capita for comparing welfare between countries and GDP growth as anindicator of social progress within a society ...

Answer 2

Answer:

Gross domestic product (GDP) stands as the standard measurement of the value-added made through the production of goods and services in a country during a certain duration. As such, it also calculates the income earned from that production or the total amount expended on final goods and services (fewer imports).

The limitations of GDP are,

• GDP does not include any measures of welfare.
• GDP only contains market transactions.
• GDP does not represent income distribution.

Explanation:

Despite several shortcomings, GDP is generally utilized as an indicator of social welfare. Most of the limitations are because in essence the concept is not supposed to calculate well-being. As a consequence, GDP falls to account for non-market marketing wealth distribution, the results of externalities, and the kinds of goods or services that are being produced within the economy. To compensate for these issues, various approaches to measuring welfare have been designed, including the Human Development Index (HDI), the Gross National Happiness Index (GNH), and the Social Progress Index (SPI).

In short, The limitations of GDP are,

• GDP does not include any measures of welfare.
• GDP only contains market transactions.
• GDP does not represent income distribution.
• GDP does not express what is being produced.
• GDP ignores externalities.
• Social Progress Index.

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