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Gross Domestic Product and its Limitations - Essay Example

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The essay "Gross Domestic Product and its Limitations" states that GDP simply refers to the monetary value of all final goods and services produced within the boundaries of a given economy, by all the residents irrespective of country of origin in a given period of time…
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Gross Domestic Product and its Limitations
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More generally, GDP usually only gives a rough idea of how the economy is performing. GDP and its related concepts [real GDP, GDP per capita, etc.] are therefore incomplete measures of an economy’s health, they only account for goods and services with legal monetary value; that is, those produced and sold in legal markets (Ouanes & Thakur, 1997). Accordingly, productive activities such as a businessman fixing its own broken machine, literally bypassing market transaction processes, is overlooked. Secondly, it evident that a country producing too many goods and services might actually do so by emitting too much carbon dioxide into the atmosphere, thus, dampening the quality of life/air within its boundaries. Such negative externalities are always relegated in the periphery in GDP accounting, which by and large reduces the quality of human life (Hunt & Nesiba, 2008). Last but not least, a country’s output increases can be the result of increased hours of work with limited time off duty. Leisure time contributes a great deal to the quality of life that one lives, so much to the extent that it is but a misguided conclusion to assume that more products and services as measured by the GDP translate into a more enjoyable life within an economy. Read More
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