The Disadvantages of Gross Domestic Product

The gross domestic product is the value of all the products and services within a country during a period of time, usually one year. The GDP is usually used to determine the economic welfare of a country. Although the GDP is a pretty good indicator of the economy, there are some disadvantages of the GDP, including the concepts that the GDP does not take into consideration.

The GDP does not take into consideration natural disasters. For example, when the GDP numbers come out at the end of 2011 it will not be a good indicator of where the United States is economically. The GDP will show the economic benefits of the help given to the victims but not show the impact to the environment.

Although the GDP looks at all the products and services, it does not take the quality of goods into consideration. If consumers buy cheap products and services and have to constantly replace them, they will spend more money then if they bought the more expensive, better quality products. The GDP then grows due to the waste and inefficiency, making it not as accurate as it could be.

The United States has to go into debt to sustain the economy. It does this by borrowing money from abroad. Because all this money needs to be repaid, this money that the country owes is not represented in the GDP. The longer its debt continues to grow, the further the GDP will be from the country's actual economic status.

The GDP is like a snapshot of where a country's economic status is. Volunteers are not taken into consideration in the GDP, but as jobs transform from volunteer to paid positions, the GDP will show economic benefits. This isn't an accurate snapshot because the jobs are still performed whether they are monetized or not.