What is real GDP? State three limitations of GDP as an index of econom

1.	What is real GDP? State three limitations of GDP as an index of economic welfare.
Answer» When GDP represent quantities of final goods and services produced or when GDP is measured on the basis of constant prices, it is called real GDP. Limitations: (i) It does not reflect distribution of income among people. (ii) It does not take into account non-monetary exchanges. (iii) It does not take into account externalities.

What is real GDP? State three limitations of GDP as an index of economic welfare.

Answer»

When GDP represent quantities of final goods and services produced or when GDP is measured on the basis of constant prices, it is called real GDP.

Limitations:

(i) It does not reflect distribution of income among people.

(ii) It does not take into account non-monetary exchanges.

(iii) It does not take into account externalities.