Advantages and Disadvantages of Real Gdp
| London School of Commerce Belgrade |
A Critical Analysis Of Real GDP
Subject: Managerial Economics
Mentor: Student:
Maja Paunovic Mirko Lazarevic
Belgrade 2013
TABLE OF CONTENTS
1. EXECUTIVE SUMMARY 3
INTRODUCTION
2. ADVANTAGES OF REAL GDP 4
3. LIMITATIONS AND SHORTCOMINGS OF REAL GDP 4 3.1 RENEWABLE FINITE RESOURCE 5 3.2 OLD AND CHILD CARE 5 3.3 UNDERGROUND ECONOMY 5 3.4 UNEMPLOYMENT 6 3.5 THE INFLATION RATE 6 3.6 POLUTTION 7 3.7 LEISURE 7 3.8 POPULATION 7 3.9 INEQUALITY OF WEALTH 7
4. CONCLUSION 8
REFERENCES 9
1. Executive summary
The gross domestic indicator (GDP) is one of the main indicators used to measure the health of a country’s economy. GDP represents the sum of all goods produces over a specific period of time or in other words it is the size of the economy. Usually, GDP is compared to the previous quarter or year. As an example, if a yearly measurement was taken and the GDP went up 3%, this means that the economy has grown by 3% over the last year. Measuring GDP can be complicated, the calculation can be done in one of three ways: the product method, the income method and the expenditure method.
The first method of measuring GDP is to sum up the value of all goods and services produced in the country. Basically, we focus on firms and add up all their production. This method is known as the product method. The second approach is the income method which is focused on the incomes generated from the production of goods and services. When we look back, we will see that this is the same as the sum of all values added at each stage of production. The added value is basically the difference between a firm’s income from sales and the cost of its purchases from other firms. The difference is made up of wages and salaries, rent, interest and profit. Basically, it consists of the incomes produced
A Critical Analysis Of Real GDP
Subject: Managerial Economics
Mentor: Student:
Maja Paunovic Mirko Lazarevic
Belgrade 2013
TABLE OF CONTENTS
1. EXECUTIVE SUMMARY 3
INTRODUCTION
2. ADVANTAGES OF REAL GDP 4
3. LIMITATIONS AND SHORTCOMINGS OF REAL GDP 4 3.1 RENEWABLE FINITE RESOURCE 5 3.2 OLD AND CHILD CARE 5 3.3 UNDERGROUND ECONOMY 5 3.4 UNEMPLOYMENT 6 3.5 THE INFLATION RATE 6 3.6 POLUTTION 7 3.7 LEISURE 7 3.8 POPULATION 7 3.9 INEQUALITY OF WEALTH 7
4. CONCLUSION 8
REFERENCES 9
1. Executive summary
The gross domestic indicator (GDP) is one of the main indicators used to measure the health of a country’s economy. GDP represents the sum of all goods produces over a specific period of time or in other words it is the size of the economy. Usually, GDP is compared to the previous quarter or year. As an example, if a yearly measurement was taken and the GDP went up 3%, this means that the economy has grown by 3% over the last year. Measuring GDP can be complicated, the calculation can be done in one of three ways: the product method, the income method and the expenditure method.
The first method of measuring GDP is to sum up the value of all goods and services produced in the country. Basically, we focus on firms and add up all their production. This method is known as the product method. The second approach is the income method which is focused on the incomes generated from the production of goods and services. When we look back, we will see that this is the same as the sum of all values added at each stage of production. The added value is basically the difference between a firm’s income from sales and the cost of its purchases from other firms. The difference is made up of wages and salaries, rent, interest and profit. Basically, it consists of the incomes produced
References: 1. John Sloman & Dean Garratt (2010), Essentials of Economics, 5th Edition, Prentice Hall. (Pages259-267) 2. (John Sloman. 6th edn , 2006). 3. Oliver Blanchard (2006), ‘Macroeconomics, 4th Edition, New Jersey: Prentice Hall. 4. Michael Burda & Charles Nyplosz (1993), Introduction to Macroeconomics, 1st Edition. Oxford University Press. 5. http://www.indexmundi.com/united_states/gdp_per_capita_(ppp).html 6. http://www.indexmundi.com/france/gdp_per_capita_(ppp).html 7. http://www.indexmundi.com/costa_rica/gdp_per_capita_(ppp).html 8. http://www.happyplanetindex.org/data/