Gross Domestic Product (GDP) serves as a broad measure of economic activity but has significant limitations in capturing the true standard of living. While a higher GDP per capita generally correlates with improved access to goods and services, it overlooks essential factors like leisure time, environmental quality, health levels, and educational outcomes. For example, GDP does not reflect increases in environmental degradation or gains in public health and safety. It also fails to account for disparities in income distribution, variations in product choices, and advancements in technology. Although GDP is a useful indicator of economic production and material well-being, it can overstate improvements by not incorporating aspects of quality of life, such as reduced crime rates or enhanced health, which might not directly impact GDP but significantly influence overall well-being.

GDP growth may not accurately reflect improvements in societal well-being, especially if non-market activities—like household labor and volunteer work—are excluded. While GDP measures economic activity, it does not account for factors such as income inequality, environmental sustainability, and quality of life. Therefore, relying solely on GDP can give a skewed view of societal well-being, necessitating additional metrics that capture broader social and economic impacts.