What is GDP what is it's demerit
Dear Student
Gross domestic product(GDP) is the market value of all officially recognised final goods and services produced within country in given period of time.GDP per capita is often considered as an indicator of a country's standard of living.
I think second part of question is " Demerits of using GDP as an indicator of economic welfare."
Demerits of GDP as an indicator of economic welfare:
(1) Distribution of GDP : GDP ignores distribution of income. There will be no change in economic welfare if the distribution of GDP is not equitable.Large fraction of the increase in income may be concentrated in a vey small percentage of society. GDP does not tell us much about the living standards of average person in a country.
Gross domestic product(GDP) is the market value of all officially recognised final goods and services produced within country in given period of time.GDP per capita is often considered as an indicator of a country's standard of living.
I think second part of question is " Demerits of using GDP as an indicator of economic welfare."
Demerits of GDP as an indicator of economic welfare:
(1) Distribution of GDP : GDP ignores distribution of income. There will be no change in economic welfare if the distribution of GDP is not equitable.Large fraction of the increase in income may be concentrated in a vey small percentage of society. GDP does not tell us much about the living standards of average person in a country.
(2).Non- monetary exchanges: Many activities in an economy are not evaluated in monetary terms. For example, Number of barter transactions take place in India which are not considered as part of economic activity. Number of transactions are not counted in the GDP of a developing country, and there is under estimation of GDP. Hence, GDP is not a good indicator of economic welfare.
Regards