Macro-Economics: Methods of Calculating the Gross Domestic Product of a Country

-The nation’s GDP is a good measure of its economic well being and progress because it represents the total value of all goods and services produced in an economy, and what a country produces and what it consumes are nearly identical.

GDP, or gross domestic product, is the sum total value of all goods and services produced by a country within a given year. To achieve this sum, everything produced and exported, all of the money spent by consumers and government, investments, and many other contributing factors are calculated and combined. A nation’s GDP is used as the main indicator of the economic status of that nation. In general, the higher a country’s GDP is, the greater the health of that country’s economy. However, GDP is not as helpful or accurate a calculation as “real GDP”. Real GDP is a term that refers

As we all know, measuring Gross Domestic product is usually complicated. However, this can be done through three means. The GDP calculation techniques include expenditure method, the product technique

Normally, real GDP is a much better measurement then nominal GDP for the basic fact that the value of a loaf of bread is remained unchanged, but because of the fluctuation of the inflation, that makes it market price different.

Real gross domestic product (GDP) is an inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year (Investopedia.com, 2004). Inflation is the fluctuation of the costs for goods/services and this has a negative impact of increasing unemployment; individuals who are searching for work and are unable to find employment (“Introduction to economics,” 2012).

For different purpose, the different GDP frames will be used. “Real GDP is the value of final goods and services produced in a given year when valued at the prices of a reference base year; Nominal GDP is the value of final goods and services produced in a given year when valued at the prices of that year. The maximum level of real GDP that can be produced while avoiding shortages of labour, capital, land and entrepreneurial ability that would bring rising inflation is called potential GDP (McTaggart, Findlay & Parkin, 2012).” In this essay, GDP stands for real GDP, and real GDP can be calculated by either the expenditure approach or the income approach. In this essay, the expenditure approach will be used. Aggregate expenditure describes the relationship between total consumption and national income. It can be calculated with a formula: AE = C + I + G + NX. In this formula, the C stands for household consumption, the I stands for investment expenditure, the G stands for government expenditure and the NX stands for net export expenditure. The change of these components will eventually affect real GPD. The expenditure approach is important because it can tell the government of consumers’ demand so that the government can better allocate resources. It can also convey the economic situation signals to the central bank to help them to carry out macroeconomic regulation and control. The figure 1 below shows the aggregate expenditure

Understanding Gross Domestic product is central for understanding the business cycle and the progression of long-run economic growth (Hubbard & O’Brien, 2011, p. 631). The GDP is defined as the value-added of all goods and services produced in a given period of time within the United States (2008). The GDP is widely used as an gauge economic wellness and health of the country. What the GDP represents has a hefty impact on nearly everyone within our economy. As an example, when the economy is healthy, you will usually see wage increases and low unemployment as businesses demand labor to meet the increasing economy. The government has two types of economic

“Godfather of the indicator world” is an expression sometimes used when referring to GDP. This is classed as one of, if not the most, important economic measure, as it provides the best and most accurate indication of economic output. GDP is an aggregate measure of the total economic production for a country. It represents the market value of all goods and services produced by the economy during the measured time period. This includes personal consumption, government spending, private inventories, construction costs and the foreign trade balance. It is predominantly presented

Gross Domestic Product (GDP) is the total market value of all final goods and services produced in a given year (McConnell 2004). This is one way of measuring the size of the economy. It is usually compared to the previous quarter or year. Economic growth is calculated as a percentage rate of growth per quarter (3-month period) or per year (McConnell & Brue, 2012). Goals of Federal Reserve policy are to maximize employment and keep inflation on a descending track until price stability is accomplished. Economic growth promotes employment, which in turn helps the economy. An economy that is experiencing economic growth is better able to meet people's wants and resolve socioeconomic problems. Rising real wages and income provide richer opportunities to individuals and families—a vacation trip, a personal

Every country produces various goods and services. Gross domestic product (GDP) is one of the indicators that display the country’s economic performance. Three approaches are used in the determination of GDP. They include: income approach, expenditure approach, and the product approach. GDP can be referred to as real or nominal GDP (Colander, 2010). When GDP is calculated without putting into consideration inflation factor, then it is referred to as nominal GDP. Adjusting the GDP by taking into consideration the inflation factor, real GDP is arrived at. As a result of the inflation factor, nominal GDP appears higher than real GDP.

2. If more energy was produced domestically, this would increase the GDP. The imports would be reduced, leading to an improved (X-M) figure. In addition, I would also increase in order to extract that energy. Both of these functions serve to increase the GDP. We are swapping wealth from another country for wealth from our country, hence GDP would improve.

Gross Domestic Product (GDP) can be calculated in three ways, Income, expenditure and output methods. Mankiw and Taylor(2014) says that in the UK The Office of National Statistics produces a single measure of GDP to do this, three approaches are used (Income, Expenditure and Production) the equal amount of all three of these approaches are then balanced out to create an overall final figure. The expenditure approach is the most commonly used method, it is based on the value of total expenditure goods and services in a current year. it sums up the level of consumption of goods and services, gross, investment, government purchase and exports and imports. The basic formula for the expenditure approach is;

According to the table above, to determine the GNP and GDP you will calculate the national product total from the national and personal income. National income is the overall annual value of goods and services within a respective country economy. The chart shows that in 2016, the GNP was $7,864.80 higher than the national income. National income is broken down into ten categories (compensation of employees, rents, interest, proprietor’s income, corporate income taxes, dividends, undistributed corporate profits, indirect business taxes, consumption of fixed capital and net foreign factor income). However, the employee compensation makes up the largest portion of the national income. In my opinion, I believe this to be true, because the economy is valued by its population and the services that are provided and goods that are sold. This can’t happen without having citizens gainfully employed, which in return will need to be compensated for the work they are contributing to their economy.

The most common way to measure economic growth is using Gross Domestic Product (GDP). Specifically, real GDP is defined as the total value of everything produced in an economy the after removing the effect of inflation. GDP calculations include everything produced in the economy including services. Often real GDP is used to compare one period to the next to determine growth of periods of time. Economists have found various ways to delve into GDP including looking at the measure on a

The Real Gross Domestic Product (RGDP) is a measure with inflation adjusted that considers the value of all goods and services manufactured in a designated year, which is indicated in a base year prices. This is also known as the inflation corrected GDP, or constant dollar GDP. On the other hand, a figure that has not been adjusted for inflation is known at the Nominal Gross Domestic Product (NGDP). Also known as the current dollar GDP. A GDP is the one figure that indicates the health of a country’s economy. A healthy economy is when you will normally see wage increases and low unemployment as businesses demand more labor to fulfill the growing economy. A GDP will appear higher than it actually is, if the inflation is not accounted for in