Gdp Essay
GDP consists of Gross (before taking into consideration the depreciation in the value of the product), Domestic (within the borders of a country) and Product which simply means a good or service. So what does it all mean when all these three factors are interlinked? GDP is simply the market value of all the final goods and services produced within a country in a given time period – usually a year (Parkin et al. 2005: 438).
The definition of GDP is composed of four parts. Firstly, we have to take into consideration the market value of the products. Froyen (2009) states that in order to gain the market value of the product we have to times the number of products produced the market by the prices they are traded at for e. g. Each unit of product A is 50p and product B is 20p so the market value of 20 product A and 40 product B is £10+£8=£18. Secondly, GDP is calculated using the values of the final goods and services and therefore does not take intermediate goods into account. A final good or service is the product brought by the user at its end stage whereas an intermediate good could have gone into the production of a final good for e. g. bread is a final product that it brought by the consumer but flour could have been brought by the producers of the bread in order to make the bread. Another factors that makes up GDP is that the product has to be made within the confidences of country which is basically summed up by the ‘D’ in GDP for e. g. if a UK retailer manufacturers his products in the UK then it becomes part of UK GDP but if it is produced and sourced from China then it does not. Finally, GDP as measured in a given time period as mentioned earlier which is usually annually or quarterly. GDP can be measured in two ways the expenditure approach which is the total spent on goods and services or the income approach which is the money earned by producing goods and services. This is called the circular flow model of expenditure and income.
The Expenditure
The definition of GDP is composed of four parts. Firstly, we have to take into consideration the market value of the products. Froyen (2009) states that in order to gain the market value of the product we have to times the number of products produced the market by the prices they are traded at for e. g. Each unit of product A is 50p and product B is 20p so the market value of 20 product A and 40 product B is £10+£8=£18. Secondly, GDP is calculated using the values of the final goods and services and therefore does not take intermediate goods into account. A final good or service is the product brought by the user at its end stage whereas an intermediate good could have gone into the production of a final good for e. g. bread is a final product that it brought by the consumer but flour could have been brought by the producers of the bread in order to make the bread. Another factors that makes up GDP is that the product has to be made within the confidences of country which is basically summed up by the ‘D’ in GDP for e. g. if a UK retailer manufacturers his products in the UK then it becomes part of UK GDP but if it is produced and sourced from China then it does not. Finally, GDP as measured in a given time period as mentioned earlier which is usually annually or quarterly. GDP can be measured in two ways the expenditure approach which is the total spent on goods and services or the income approach which is the money earned by producing goods and services. This is called the circular flow model of expenditure and income.
The Expenditure