Q. 75.0( 2 Votes )

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Answer :

GDP refers to the sum of all the goods and services produced in an economy in the given accounting year. While calculating the GDP only monetary transactions are taken into account since they’ve a value. However, this is only an indicator for the performance of a country but not an adequate parameter to measure welfare or development. Hence one of the major limitations of GDP is that it doesn’t take into account the non-monetary exchanges like services by a house-wife, gardening or a parent teaching their children. Even though they contribute to the development of a child or household they cannot be estimated as there is no monetary value assigned to such exchanges. This is how non-monetary exchanges are a limitation as they cannot be accounted for even though they contribute to welfare.

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