Final answer:
GDP is a vital economic measure that assesses the total value of goods and services produced; however, it doesn't account for distribution of income, non-market transactions, or qualitative aspects of life. Economic growth measurement is crucial for policymaking and resources allocation.
Step-by-step explanation:
Gross Domestic Product (GDP) provides a monetary measure of the market value of all final goods and services produced in a country during a specific period. While it is a critical economic indicator, GDP does have its limitations. It measures economic activity but does not account for the distribution of income among residents of a country, nor does it measure whether the nation's rate of growth is sustainable in the long-term.
GDP also fails to consider the non-market transactions that do not involve a purchase or sale and informal trade. Moreover, it does not reflect factors such as environmental sustainability, health, education quality, and leisure time; which are essential components of well-being and quality of life.
Measuring economic growth is essential as it influences policy decisions and the allocation of resources. It indicates the health of an economy, guides investment decisions, and provides a basis for comparing the economic performance of different countries. As such, while GDP is an important tool, it should be used in conjunction with other indicators for a more complete picture of economic health.