Gross Domestic Product
Writing Assignment #2: Gross Domestic Product
Gross domestic product also known as GDP is the total value of all goods and services produced in the economy during a specified period of time, such as a year or quarter. GDP is very important to the American economy because it effects each individual in some type of way. Improvements in the economic well-being of individuals in any society cannot occur without such an increase in real GDP. When real GDP per capita is increasing, then the well-being- or the standard of living- of individuals in the economy, is improving. When measuring GDP it is important to keep nominal and real GDP in mind. There are three main approaches to measuring GDP, the expenditure approach, product approach and the income approach. While GDP helps measure the American economy there are different types of money transactions that are not included in GDP.
Nominal GDP is the GDP that is evaluated at current market prices. The nominal GDP includes all the changes that occur during the year in the market because of inflation or deflation. Real GDP is the measure of constant prices. The difference between real and nominal is the real values are adjusted for inflation and nominal values are not. With the real values being adjusted the nominal values often tend to higher then the real GDP values.
When GDP is being measured under the expenditure approach it is being calculated by adding up all the total spending made on the final goods and services. Consumption (household), investment (business), government and net by foreigner’s expenditures are all included in the expenditure approach. Expenditure approach is calculated using GDP= C+I+G (X-M). The “C” stands for personal Consumption, “I” is investment, “G” government and (X-M) is for the net exports. Income is the next approach used to calculate GDP. The Income approach is calculated by adding up the factor incomes to the factors of production in the society. The last approach that I will talk
Gross domestic product also known as GDP is the total value of all goods and services produced in the economy during a specified period of time, such as a year or quarter. GDP is very important to the American economy because it effects each individual in some type of way. Improvements in the economic well-being of individuals in any society cannot occur without such an increase in real GDP. When real GDP per capita is increasing, then the well-being- or the standard of living- of individuals in the economy, is improving. When measuring GDP it is important to keep nominal and real GDP in mind. There are three main approaches to measuring GDP, the expenditure approach, product approach and the income approach. While GDP helps measure the American economy there are different types of money transactions that are not included in GDP.
Nominal GDP is the GDP that is evaluated at current market prices. The nominal GDP includes all the changes that occur during the year in the market because of inflation or deflation. Real GDP is the measure of constant prices. The difference between real and nominal is the real values are adjusted for inflation and nominal values are not. With the real values being adjusted the nominal values often tend to higher then the real GDP values.
When GDP is being measured under the expenditure approach it is being calculated by adding up all the total spending made on the final goods and services. Consumption (household), investment (business), government and net by foreigner’s expenditures are all included in the expenditure approach. Expenditure approach is calculated using GDP= C+I+G (X-M). The “C” stands for personal Consumption, “I” is investment, “G” government and (X-M) is for the net exports. Income is the next approach used to calculate GDP. The Income approach is calculated by adding up the factor incomes to the factors of production in the society. The last approach that I will talk