Question

Question 2

List 3 weaknesses/problems with GDP and give a once sentence explanation for each.

Answer 1

GDP is the total value of final goods and services produced within the country during a year.

The problems with GDP are as follows:

1) Production for self consumption:

In India farmers produce large portion of agricultural products and they keep some portion with themself for self consumption.such goods will not be enter in the market. Farmers do not maintain the accounts of such goods.This reduces the value of GDP.

2) Unpaid Services:

GDP is always measured in terms of money.But the unpaid services like housewives, charitable institutions,NSS students etc which are not included in the calculation of GDP.

3) Transfer Payments:

Payment from government such as old age pension, widow pension, unemployment benefit etc are transfer payments.

Such payments are ignored from the calculation of GDP. Because these are the part of individual income and government expenditure.