Paper Topic:

Macroeconomics

Running Head : MACROECONOMICS

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What are the shortcomings of using the GDP to measure the nation 's economic wellness

GDP or Gross Domestic product is perceived as the most important economic indicator and used for comparison purposes in as far as economic performance of nations is concerned . However , it has many limitations or shortcomings in its calculation as well as its analysis which makes it an ineffective tool to measure nation 's wellbeing or their welfare . The calculation of GDP is done through

two major approaches that is the income approach as well as the expenditure approach where the country with a higher GDP does not necessarily stand a better rank in as far as economic welfare is concerned as there is a clear distinction between economic growth and economic development . Economic growth simply means that the GDP is higher than was the case in a previous time while economic development incorporates vital aspects such as the development of infrastructures that improves people 's wellbeing (Wessels W , 2006

GDP ignores household production and consequently fails as a tool to measure people 's wellbeing (Wessels W , 2006 . As Allan and Laurence noted in their distinguished book , Macroeconomics an integrated approach , GDP ignores the subsistence and the underground economy which are also important in determining people 's welfare . A country may have a low GDP yet have a higher production in the household or subsistence sectors thus have her...

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