Gross Domestic Product

Jul 7th, 2015
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St. Catherine University
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The gross domestic product (GDP) is applied to determine the strength of a country's economy. . It shows total value of all goods and services in dollar units within a specified period of time. GDP is compared with previous years or quarters to draw results e.g. quarter to quarter GDP is 5% which depicts 5% growth in economy compared to previous quarter.

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Gross Domestic Product and everything involved with it?Thegross domestic product(GDP) is applied to determine the strength of a country'seconomy. It shows total value of all goods and services in dollar units within a specified period of time. GDP is compared with previous years or quarters to draw results e.g. quarter to quarter GDP is 5% which depicts 5% growth in economy compared to previous quarter.GDP can be calculated through income approach or consumption approach which means either we compare everything spend or everything earned by the economy. But the amazing thing about these two measures is that both measuring approaches give approximately same total results.The income approach, which is denoted as GDP (I), is calculated by summing up total compensation to employees, gross profits for incorporated and non incorporated firms, and taxes minus any subsidies. The expenditure method is the more general approach and is calculated by summing total consumption, investment, government spending and net exports.It is vital to understand how to calculate GDP by using both of these two approaches. Below is the calculation of GDP using consumption approach:1. The following equation is used to calculate the GDP with consumption approach: GDP = C + I + G + (X - M) or GDP = Gross Domestic productPrivate consumption =CGovernment investment =IGovernment spending =GExports=X Imports=M2. Nominal value changes due to shifts in quantity and price.Examples of Calcu

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