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A Primer on Macroeconomics by Thomas Beveridge

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Limitations of The GDP Concept: An Incomplete Picture

We have already seen that the calculation of GDP requires art as well as science—whether a car is classified as consumption or investment requires some judgment. GDP has other limitations.

Market transactions: GDP is the “market value” of production—but some goods and services are never recorded in a market. There is no market for soldiers or police officers, for instance.

Household production is another potentially large area that is not counted—home preparation of meals is a valuable service but is not accounted for. As an economy develops, or with the increasing participation of women in the labor force, families become less reliant on homegrown food, home-cooked meals, and domestic production ...

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