Why Does Real GDP Have Limitations in Determining Economic Welfare

question 89

Essay

Why does real GDP have limitations in determining economic welfare?

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Definitions:

Inputs

The resources used in the production process to produce goods or services, including labor, materials, and capital.

Output

The amount of goods or services produced by a person, machine, factory, or entire economy in a certain period.

Returns To Scale

A concept in economics that describes how the output of a production process changes as the scale of production inputs changes.

Production Function

A mathematical model that describes the relationship between inputs used in production and the resultant output.