Question

What does GDP not tell us about the economy?

Short answer

GDP does not take into consideration the underground economy since it is based on official statistics and so does not account for the size of the underground economy, which can be large in some countries.

Step-by-step solution

Definition

Gross domestic product or GDP can be defined as the value of all the final goods and services produced in an economy in a year.

Explanation

According to some critics, GDP does not compensate for the underground economy. It isn't even close to being a measure of "wealth." It is a monetary indicator. It's a backward-looking "flow" statistic that informs you how much money was spent on products and services in the past. It says nothing about whether you'll be able to generate the same quantity next year.