GDP only measures output and doesn't account for the quality of the good. For example, China's production is increasing rapidly, causing its GDP to increase. However, the quality of the goods is poor and a good economy should produce quality goods. The market always goes back to quality goods.
Great job Matt. Quality of goods is absolutely a flaw of GDP. Further flaws include time lags. GDP is measured every quarter and the tradition had been to wait two quarters before denoting a trend. That is half a year before realizing or accepting that the economy has turned before any policy is enacted.
GDP only measures output and doesn't account for the quality of the good. For example, China's production is increasing rapidly, causing its GDP to increase. However, the quality of the goods is poor and a good economy should produce quality goods. The market always goes back to quality goods.
ReplyDeleteGreat job Matt. Quality of goods is absolutely a flaw of GDP. Further flaws include time lags. GDP is measured every quarter and the tradition had been to wait two quarters before denoting a trend. That is half a year before realizing or accepting that the economy has turned before any policy is enacted.
ReplyDeleteAny others?
ReplyDelete