Answer to Question #127898 in Macroeconomics for George

Question

limitations using Gross National Product as a measure of economic performance?

Answer 1

In a way, GNP can be viewed as an indicator of economic efficiency.

But, there are the following restrictions:

• the consequences of economic growth can be negative - inflation, overproduction of goods, environmental pollution, climate change;
• transactions such as the sale of former property, barter, etc. may not be taken into account in the calculation.
• transactions in the shadow economy are not taken into account
• does not take into account the difference in income of the population
• does not take into account the development of technical progress

Therefore, we can say that GDP, GNP are indicators, as it were, a benchmark of economic efficiency, but not exclusively as indicators of economic efficiency.