Domestic Product (GDP) is an economic measure of a nation's total income and output for a given time period (usually a year). Economists use GDP to measure the relative wealth and prosperity of different nations, as well as to measure the overall growth or decline of a nation's economy. Using GDP as a measure of a nation's economy makes sense because it's essentially a measure of how much buying power a nation has over a given time period. GDP is also used as an indicator of a nation's overall standard of living, because, generally, a nation's standard of living increases as GDP increases. But there are a number of shortcomings to use GDP as an indicator of a nation's overall standard of living: (1)GDP does not count unpaid volunteer work: GDP does not take into account work that people do for free., from an afternoon spent picking up litter on the roadside to the millions of man-hours spent on free and open source software (such as Linux). (2) Crime and Natural Disasters can raise GDP: Wars require soldiers, oil spills require cleanup, and natural disasters require health workers, builders, and all manner of helping hands. Rebuilding after a disaster or war can greatly increase economic activity and boost GDP. Crime is counted as a benefit to the economy from the GDP prism, since crime spurs consumption of security items, repair or replacement of property, and spending on crime prevention security services. (3) GDP does not account for quality of goods: Consumers may buy cheap, low-quality, short-lived products repeatedly instead of buying more expensive, longer-lasting goods. Over time, consumers could spend more replacing cheap goods than they would have if they had bought higher-quality goods in the first place, and GDP would grow as a result of waste and inefficiency. (4) GDP does not distinguish between financial transactions that diminish the well-being of people or environment. GDP treats natural capital depletion as income. (5) GDP Ignores income distribution：GDP does not take into account the distribution of income and makes inequalities of income and wealth, as all tides don't lift all boats. (6) GDP overlooks the disadvantages of financing the economy through debt：the downside of excessive debt is not reflected in the GDP.
So GDP is just one indicator of a nation's overall economic health, economists are constantly working on other ways to measure an economy. It is a multi-objective-task to measure of the welfare of a country. At least the three main respects should be considered together: (1)Social progress which recognises the needs of everyone, (2)Effective protection of the environment, and (3)Prudent use of natural resources.
Reference:
http://www.nationmaster.com/article/The-Importance-of-GDP-Per-Capita
http://www.helium.com/items/601857-the-gdp-how-the-gdp-is-calculated-and-what-it-does-not-count
http://www.bos.frb.org/education/ledger/ledger03/winter/measure.htm
