1 / 5

Shortcomings of GDP

This article delves into the shortcomings of GDP, exploring how it understates and overstates economic realities. It discusses the exclusion of unpaid services, lack of quality adjustments, and neglect of the underground economy. Additionally, it examines the failure to deduct pollution costs and implications for well-being. Discover the complexity behind GDP calculations in this insightful read.

bethann
Download Presentation

Shortcomings of GDP

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Shortcomings of GDP Part III of Unit 3 Measuring domestic output, national income and the price level

  2. GDP Understated • GDP does not measure some very useful output because it is unpaid (homemaker’s services, parental child care, volunteer efforts, home improvement projects (labor done by homeowner)) • GDP does not measure improvements in product quality or make allowances for increased leisure time • GDP does not measure improved living conditions as a result of more leisure time

  3. GDP makes no value adjustments for changes in the composition of output or the distribution of income • Nominal GDP simply adds the dollar value of what is produced; it makes no difference if the product is guns or butter. • GDP figures do not provide information about how the income is distributed • Per Capita GDP is a more accurate way to measure performance (real GDP / population)

  4. The Underground Economy is not counted • Illegal activities, unreported tips, cash only jobs, reporting only a portion of profits • Value is estimated to be an additional 8% of GDP

  5. GDP Overstated • The harmful effects of pollution are not deducted from GDP • Oil spills, increased incidence of cancer, destruction of habitat for wildlife, the loss of a clear unobstructed view • GDP does include payments made for cleaning up the oil spills and the cost of health care for the cancer victim

More Related