Why do you suppose that some economists have expressed concerns about the possibility that GDP...

Question:

Why do you suppose that some economists have expressed concerns about the possibility that GDP may become a more subjective measure of economic activity as intangible investment becomes a larger fragment of GDP in the future?

Gross Domestic Product

Gross domestic product (GDP) is the aggregate market value of all the goods and services produced over a specific period. GDP can be further subdivided by each industry and sector.

Answer and Explanation:

Traditionally GDP was designed to measure the value of tangible goods and services that individuals or firms provided. These things were easy to measure because they took up space or occurred in real time. As more of the economy becomes digitized and goods no longer take up tangible space and services no longer occur in real time, it becomes harder to measure productivity and value. Firms in developed countries no longer rely on making things or providing services. They make a lot of their money through returns on investments in future technologies or ideas. While there is real capital moving back and forth, it is not always clear what the result is. If investment, research, and development are no longer expenses as measured GDP, the end result will be relying on the subjective accounting methods of individual firms. This will produce a more subjective measure of GDP.


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Overview of the Gross Domestic Product

from CLEP Social Sciences and History: Study Guide & Test Prep

Chapter 59 / Lesson 2
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