Frank Shostak: Is GDP an Accurate Measure of Reality?

To gain insight into the state of an economy, most economists rely on a common statistic named the Gross Domestic Product (GDP). The GDP looks at the value of final goods and services produced during a particular period, usually a quarter or a year.

Using this measurement statistic assumes that what drives the economy is not the production of goods and services, but rather consumption. In GDP, what matters is the demand for final goods and services. Since consumer outlays are the largest part of the overall demand, it is commonly held that consumer demand is the key productive factor in the economy. Because the supply of goods is taken for granted, this framework ignores the various stages of production that precede the emergence of final goods.