The concept of GDP is used by policy makers for many purpose

The concept of GDP is used by policy makers for many purposes that include keeping track of the growth of our economy and forecasting a recession; but it is also abused by some. Discuss some applications of the GDP which may be considered improper use or abuse of the concept.

Solution

The biggest lag that is present in concept of GDP is the way it is calculated and interpreted.

GDP includes total amount of production in a given period of time. High GDP means more growth and which inturn gives power to the goverment to spend money in various sector. For example Research and development. But if the values are not calculated correctly then the amount which is to invested will not be there which intrun will have a long lasting effect on the economy of the country.