Gross Domestic Product
Gross Domestic Product (GDP) is a metric produced by the Bureau of Economic Analysis, and used for classifying and quantifying the financial well-being of nations. It seems GDP is the gold standard for measuring success of the world’s economies, but is it enough? One might question the attributes of success and determine the need for a more comprehensive tool.
Mankiw (2015), defines GDP as “the market value of all final goods and services produced within a country in a given period of time” (p. 198), such as monthly, quarterly or annually. The process used in calculating GDP classifies all goods and services produced in the economy into one of four components, the summed total of each component can also determine average …show more content…
Mankiw (2015), illustrates the formula for calculating GDP of an economy as follows: Y = C + I + G + NX, where Y is GDP, C represents consumption activity, I is investment activity, G represents government expenditures and NX signifies net exports, or domestic exports minus domestic imports. Mankiw (2015), identified and explained the four components of GDP as consumption, investment, government purchases and net exports. Consumption includes all household spending for goods and services produced and legally available for sale such as food, energy, clothing, education and healthcare to name a few. Consumption affects each of us in the way we live, by reflecting which goods and services we value and therefore purchase with limited dollars. Investments are the second GDP component; these are purchases made which enable further production of additional goods and services. …show more content…
Without investments in production, economies curb expansion and consumers may experience fewer choices and limited quantities of available goods and services. Government purchases at all levels from local to national represent the third component of GDP. Government purchases include government salaries and expenditures on goods purchased and services provided to the public. When governments expand, expenditures generally increase, while a shrinking government has the opposite effect. Government purchases directly affect the level of service provided for public services such as police, fire, education and military related services. According to Mankiw (2015) GDP excludes government transfer payments such as welfare and unemployment benefits because they do not measure income or expenditure for producing goods or services. The final GDP component is the market value of net exports, which is equal to the total value of goods and services produced domestically and exported to foreign nations, minus
Gross Domestic Product (GDP) is a metric produced by the Bureau of Economic Analysis, and used for classifying and quantifying the financial well-being of nations. It seems GDP is the gold standard for measuring success of the world’s economies, but is it enough? One might question the attributes of success and determine the need for a more comprehensive tool.
Mankiw (2015), defines GDP as “the market value of all final goods and services produced within a country in a given period of time” (p. 198), such as monthly, quarterly or annually. The process used in calculating GDP classifies all goods and services produced in the economy into one of four components, the summed total of each component can also determine average …show more content…
Mankiw (2015), illustrates the formula for calculating GDP of an economy as follows: Y = C + I + G + NX, where Y is GDP, C represents consumption activity, I is investment activity, G represents government expenditures and NX signifies net exports, or domestic exports minus domestic imports. Mankiw (2015), identified and explained the four components of GDP as consumption, investment, government purchases and net exports. Consumption includes all household spending for goods and services produced and legally available for sale such as food, energy, clothing, education and healthcare to name a few. Consumption affects each of us in the way we live, by reflecting which goods and services we value and therefore purchase with limited dollars. Investments are the second GDP component; these are purchases made which enable further production of additional goods and services. …show more content…
Without investments in production, economies curb expansion and consumers may experience fewer choices and limited quantities of available goods and services. Government purchases at all levels from local to national represent the third component of GDP. Government purchases include government salaries and expenditures on goods purchased and services provided to the public. When governments expand, expenditures generally increase, while a shrinking government has the opposite effect. Government purchases directly affect the level of service provided for public services such as police, fire, education and military related services. According to Mankiw (2015) GDP excludes government transfer payments such as welfare and unemployment benefits because they do not measure income or expenditure for producing goods or services. The final GDP component is the market value of net exports, which is equal to the total value of goods and services produced domestically and exported to foreign nations, minus