Final Goods and Services Essay: Gross Domestic Product

Gross Domestic Product
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Gross Domestic Product
Mankiw (2014) defines GDP as, “the market value of all final goods and services produced within a country in a given period of time”. The level of a country’s economic growth can be measured using its GDP, which is one of the many primary indicators of economic growth. The size and health of a country’s economy can be determined by the value of its GDP. Economists use GDP to find out the rate of economic growth of a country and at the same time come up with suitable policies to sustain growth. The expenditure approach and the income approach are the two main methods that are normally used to compute a country’s GDP ( HYPERLINK "/search?client=firefox-b&sa=X&biw=1024&bih=635&tbm=bks&q=inauthor:%22N.+Gregory+Mankiw%22&ved=0ahUKEwiekbrx2KTOAhXMC8AKHYezBSIQ9AgIIzAB" Mankiw, 2014). The expenditure approach involves summing up everyone’s expenditure and this includes net exports, government expenditure, investment and total consumption (Mankiw, 2014). On the other hand, the income approach involves summing up everyone’s income that may include taxes, gross profits from companies as well as employee salaries in a financial year and subtracting all subsidies.
The GDP of a country has significant impact on the stock market, wages as well as the rate of unemployment. However, it is important to point out that the wellbeing and welfare of a nation cannot entirely be measured using GDP. To begin with, GDP does not pay attention to the people involved in production, what they produce as well as the methods of production they use and only focuses on measuring the end products and services (World Economic Forum, 201...