Answer to Question #230488 in Macroeconomics for Owen

Question

Discuss the strength and weakness of using GDP data to measure the social well being of a nation

Answer 1

GDP accurately indicates the economy size and the rate of growth of GDP is the best single indicator of economic growth while per capita GDP has a close correlation with the living standards trend over time.

Weaknesses of GDP

1. Excludes non-market transactions
2. Fails to account for the degree of income inequality in society.
3. Fails to indicate whether the nation's growth rate is sustainable or not.