what are the 3 weakness of RGDP per capital as a measure of propserity.

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what are the 3 weakness of RGDP per capital as a measure of propserity.

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Answer 1

Answer #1

Like Nominal GDP, RGDP suffers from following shortcomings:

(1) It does not measure or reflect change in technology or quality of goods, which fails to reflect prosperity,

(2) It does not take into consideration the negative externalities (e.g. environmental damages) arising out of increase in output, and

(3) It includes components which do not directly contribute to individual prosperity (e.g. higher military spending equips an economy from threats of potential wars, but such increase in spending does not lead to higher prosperity of residents).

Since RGDP does not work as an ideal yardstick of prosperity, RGDP per capita too is not a strong measure of prosperity.

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Answer 2

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