ECON 104 Study Guide - Midterm Guide: Fiscal Policy, Laissez-Faire, Government Spending
23 Jan 2017
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Limitations of gdp: household production: taking care of children and making homemade meals is production and it should be counted towards gdp. Additionally, it does not take into consideration how hard people work to produce output: gdp ignores bads : money that is spent on guns, security, and prisons. Money spent on them are included in gdp because people get paid for providing the service and producing the goods. However, it indicates that the economy is taking a turn for the worst. However, a service was provided or/and a good was produced: increasing inequality: gdp could be increasing and assuming population stayed constant it would appear that everyone in the population is getting richer. However, if there is rampant inequality, it will not provide policymakers with an accurate view of how economy and society are doing. Something that has been around for several decades.
