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