What are the problems of measuring national income?No

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pohnpei397 eNotes educator| Certified Educator

I am assuming that you are asking about the problems of common measures of national income such as GDP rather than the technical problems associated with measuring GDP.

By technical problems, I mean that measuring GDP can be difficult, especially in less developed countries which lack elaborate record-keeping procedures.

Problems with GDP as a measure of how well-off a country is:

It doesn't count nonmarket production such as services provided for one's family.

Illegal activities such as black markets are not counted even though they can be significant.

Government services are usually worth less than their nominal cost but this can't be measured because you can't observe market prices for many of these services.

Even GDP/capita doesn't capture how the income is distributed.

Finally, GDP puts no value on leisure time and therefore cannot measure how happy people in a country.