Pondering Gdp

Topics: Gross domestic product, Economics, Measures of national income and output Pages: 6 (2456 words) Published: April 28, 2013
GDP is an acronym for Gross Domestic Product (GDP). The Gross Domestic Product (GDP) is the total money and market value of goods that are created, produced and sold in a total year. The Gross Domestic Product (GDP) comes with many negative and positive aspects. The main goal is to evaluate the total level of output in the economy as well as the well being of the entire population involved. “Money isn’t everything. But for measuring national success, it has long been pretty much the only thing. The specific metric that has prevailed since World War II is the dollar value of a country’s economic output, expressed first as gross national product, later as Gross Domestic Product (GDP). The era of GNP and GDP has been characterized by a huge global rise in living standards and in wealth.” (Harvard Business Review) GDP is broken down into two measures, the income measure and the expenditure measure. The income measure approaches the Gross Domestic Product (GDP) by equating the nation’s output as a whole by the amount of money that the people involved in the populations make, such as employee compensation, interest received and interest paid, rent income and royalties. Business payments for the course of a year are included in the measure. The business payments are an income approach because when a business makes a payment, the payment is typically income to the recipients of said payments. The expenditure method approaches Gross Domestic Product (GDP) as an output accounting method. The goal of the expenditure method is to find the nation’s total output by adding up the total of money that a population spent throughout the entire full year. The expenditure method is broken down into a formula GDP= C + I + G + (X-M). There are also two types of GDP, nominal GDP and real GDP. Nominal GDP is defined as the yearly output of services and goods, and their totaled prices for the year. The nominal GDP is known to provide a perfect measure of the yearly economic performance. The real GDP is a useful alternative to nominal GDP in which it discovers what is wrong with the nominal GDP. The real GDP measures the amount of output that was made during the current year and the prices that came from they ear before. This enables us to be able to measure the output of several years.

The Gross Domestic Product (GDP) comes with many particular strengths. Since the Gross Domestic Product (GDP) is the most used source of economic measurement, one has to agree that the Gross Domestic Product must be doing something right. If the Gross Domestic Product (GDP) was doing as poor of a job as most say, then we would not be using it so much and we would come up with a “better” solution and actually stick with it, but so far that has not happened and we continue to use the Gross Domestic Product (GDP) to deal with most of economic situations. The Gross Domestic Product (GDP) is also used throughout the world in many different nations, so it is heavily relied upon. “A decomposed GDP can highlight comparative strengths and weaknesses of various sectors. Tracking this number can thus give policy-makers and analysts an easy-to-use tool that helps steer economic policy. The GDP is also an accurate barometer of the business climate. Technically, a recession may be simply two consecutive quarters of negative GDP growth, but to business and government it is a signal to adjust their policies.” (Haggart) The Gross Domestic Product (GDP) allows us to compare both the high and low points of the various businesses and incomes that we produce over the course of a year. By having the GDP, economists have an easy way to not only form an economic policy for the population to abide by, but this also enables them to steer the policy in the right and most positive direction possible. As Haggart says, the GDP is the tool that we use to measure the economic climate for the year, and even though a recession stems from two quarters of bad GDP growth, the GDP is a tool that...
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