Question

Explain why the real GDP in constant dollars might be inaccurate measure of economic activity?

Answer 1

GDP at Constant Price, also termed as real GDP is termed to be inaccurate measure. There are disadvantages in using the GDP as a measure of national income as well as a measure of economic well being. They are as follows:

1) GDP does not take into account the value of non-monetized activity

2) GDP does not take into account the sustainability of future GDP

3) GDP does not differentiate among more or less productive economic activity. GDP implicitly makes an assumption that economic activity is the desirable ends rather than a means to an end.