Answer to Question #308997 in Macroeconomics for Kinza Tariq

Question

3. Explain some of the major limitations of the GDP concept.

Answer 1

Since the GDP measures the value of final goods and services of a country within a specific period of time, it does nit accurately describe the value of goods and services produced in such an economy. Some of its limitations are:

1. It does not take into account those items that are not making direct economic contributions to current production.
2. In most countries, it is hard to regulate most underground or illegal activities. Such activities would have a huge impact on the GDP computations if added. But because of their illegal nature, they're been excluded.
3. Leisure or time off work are not monetized. The opportunity cost of taking the off work is not taken into consideration when calculating or computing GDP figures.
4. Most times, non-marketable goods are not accounted for. Such services like barbing one's self, cooking or learning.