GNP Accounting

Issues and Limitations

1. ECONOMIC VS. SOCIAL VALUES
National income and product figures
measure the economic rather than the
social value of production in terms of
market prices of the different types of
goods and services.
2. ECONOMIC VS. SOCIAL COST
The same difficulty arises regarding
economic and social costs because here
is no identity between the economic
costs of producing the current national
output and the social costs of the
output.
3. DISTRIBUTION OF NATIONAL OUTPUT
It shows the distribution of income
in various forms like wages, interest,
rents, profits etc. but it does not show
the distribution of income to persons.
4. INCOME & OUTPUT PER CAPITA
A rise in real income will not bring
an improvement in the material level of
well-being if population grows at a
faster rate than the total output.
5. THE VALUE OF LEISURE
In any analysis of economic, welfare
the account of leisure time at the
people’s disposal ranks high in
importance, yet the national income and
product accounts do not measure
directly the value of leisure to society.
6. QUALITATIVE CHANGES
IN NATIONAL OUTPUT
Qualitative changes in the national
output produced by changes in prices of
goods and services must be taken care
of, if comparisons were to be made of
the national output at different points in
time.
7. THE COMPOSITION OF OUTPUT
The various aggregates of the
national income accounting do not tell
us much about the composition of
national output except in broad terms of
consumption, investment, government
expenditure etc.