GDP and Its Limitations
It is highly recommended that you review the Seminar presentation located in the Seminar area before beginning the Discussion.
Gross Domestic Product (GDP) measures the market value of the final goods and services produced within a country during a given period of time. In other words, GDP measures continuous flow of money from households to firms and then back to households in the macroeconomy. (Refer to Chapter 25)
The trend of the GDP growth rates is the key indicator of macroeconomic fluctuations (business cycles), which include expansion, boom, contraction, and recession. Thus the real GDP is used to explain how well the overall economy of a country is performing whereas GDP per capita is used as a natural measure of the economic well-being of the average individual in a given country. But GDP has limitations and it is not a perfect measure of the economy and economic health.