Question

discuss how the GDP concept may be used incorrectly.

Answer 1

GDP refers to the market value of all goods and services produced in an economy in a given year. Therefore, GDP reflects the level of output and income in an economy. GDP is a very important factor in determining the economic development and the overall wellbeing of people. However, GDP is not the sole criteria for determining the quality of life in a country, which depends on health status, mental well-being, happiness, etc. of the citizens. GDP may be incorrectly used as a proxy for the overall well-being of people. However, higher GDP does not necessarily indicate a higher overall wellbeing of people. The overall well-being of people also depends on how the total income is distributed among people, how much effort is made on developing human capital or improving health status or preventing environmental degradation, etc.