Question

Explain why real GDP might be an unreliable indicator of the standard of living.

Answer 1

• GDP which is the gross domestic product
• it is the final production value of goods and services that is produced within the domestic boundary of a country in a financial year
• it is generally measured on quarterly or yearly basis
• it is very common factor that is use across the world for measuring the economic growth rate
• But many economists do not consider it as a perfect indicator for overall telling the economic situation of the country
• it lacks so many important factors that if included then gives a real data or accurate data
• examples can be -

1. carbon footprint index
2. happiness index
3. Gini coefficient index for income inequality

• only country in the world that measures the happiness index is the Bhutan
• So these factors must be added for an overall good picture of growth rate of a country
• therefore GDP only might not be only a reliable indicator