write one limitation of calculating the GDP of a nation.
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Answers
Answer:
There are many ways of calculating and measuring the GDP of the country. But it does not include any aspect of welfare or well-being. It does not calculate the various aspects of welfare and only includes 'market transactions'. Therefore GDP calculations are limited in this aspect and cannot be called valid.
Answer:
The primary shortcoming of GDP is that it does not accurately capture all aspects of economic activity, which reduces its usefulness as a gauge of economic welfare. The state of people's welfare generally cannot be reflected by GDP.
Explanation:
The Limitations of GDP
The trend of economic development may be reflected in changes to GDP, and the majority of nations view GDP growth as their primary objective for economic expansion. Although the gross domestic product (GDP) has been widely utilised as an indication of the state of the global economy, there are inherent limitations and flaws in this approach that limit its use in more areas of economic growth. Additionally, it makes the GDP less effective in measuring economic welfare. The primary shortcoming of GDP is that it does not accurately capture all aspects of economic activity, which reduces its usefulness as a gauge of economic welfare.
The state of people's welfare generally cannot be reflected by GDP.
In general, economic expansion may result in an increase in people's income and financial security. The average level of people's income in a country is typically determined by looking at its per capita GDP. Additionally, it is used to categorise counties according to their levels of economic development. However, it is unable to account for variations in people's welfare brought on by variations in income distribution. For instance, if there is only one other person in his country, Bill Gates, and, he may become a billionaire in terms of GDP per capita. He probably won't have the same level of welfare as Bill though. Thus, GDP or per capita GDP hides the true state of well-being that people actually receive (Bérenger and Verdier-Chouchane, 2007).
In addition, there are many aspects of people's welfare, in addition to economic ones. Leisure time and family fun are also crucial components of welfare. When people are busy generating the final goods and services, they would have little time for family time. Increases in GDP do not necessarily translate into improvements in people's standard of living.
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