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Chapter 8: Ques b) - For Critical Thinking (page 171)

Why might a range of dashboard economic indicators be difficult to include in one single measure such as GDP ?

Short Answer

Expert verified

Non monetary exchange, Externalities, GDP composition - indicators of welfare are difficult to be included in single measure GDP

Step by step solution

01

GDP and welfare basics 

Gross Domestic Product is the aggregate value of final goods and services produced by an economy, during a specified period.

Welfare is the sense of socio economic wellbeing.

02

Explanation 

GDP doesn't include following indicators of welfare

  • Non monetary exchange - of goods and services, like care work of house wives
  • Externalities - show extra positive and negative side effects, like parks as positive externalities and pollution as negative externalities respectively
  • GDP composition - of goods and services is important for welfare, like food is positive effect good but alcohol is negative impact good.

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