Measurement of Economic Growth: Increase in GNP/GDP in long run

Measurement of Economic Growth: Increase in GNP/GDP in long run

Economic Growth is measured as increase in GNP over a long period of time. economic growth is a narrow concept and it is a part of economic development, we can also say it is the process of adopting new technologies.GNP as a measure of national development is faced with several challenges such as: 

  1. If a rise in real national income is accompanied by a faster growth in population, there will be no economic growth but retardation.
  2. The GNP figure does not reveal the costs to society of environmental pollution. It considers natural resources to be free.
  3. It tells nothing about the distribution of income in the economy.
  4. GNP is always measured in money terms, but there are a number of goods
    and services which are difficult to measure in terms of money e.g. taking
    care of the children by the mother.
  5. Double counting which arises from the failure to distinguish properly
    between final and intermediate products.

GNP thus, is not a satisfactory measure of development it has not been successful in reducing poverty, unemployment and inequalities in the society.

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