GDP Measurement and its weakness

Gross domestic product measures the aggregate production of final goods and services taking place within the domestic economy during a year. GDP is the measure of the growth of any economy.We treats higher level of GDP of a country as an index of greater well-being of the people of that country.

But there are some of the weaknesses present in the GDP measurement.

• GDP measures the growth of the economy not the growth in the income of the individuals. As when the increase in the production of the industries, increased the GDP but it may happen that, for the rest population income will be same or fallen.

• As GDP measures the monetary exchange. When any exchange taken place in non monetary term then it is not calculated in the GDP. These types of non monetary exchange are taken place in the developing countries.

• Externalities: - Externalities refers to the benefits (or harm) a firm or an individual cause to another for which they are not paid (or penalized).When a factory is set up then the value added of that factory is counted as part of the GDP but when Carbon Dioxide is emitted in the environment by this factory which harms the surrounding environment such as it harms the production of the plant but the factory owner do not paid any cost to the plant owner, it is called externalities.

So, according to me there is some improvement is required in the way by which GDP is calculated because it gives all results in an average.

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