Question

THIS WEEKS TOPIC: macroeconomics perspective.

gross domestic product (GDP)

i need to post 1 question about the material covered in class this week. this weeks lecture notes were on: macroeconomics perspective &

gross domestic product (GDP).

cannot ask exam/ quiz style questions. i need to ask questions that will help me or someone get a better understanding of the material. something i may need clarification on, etc.

Answer 1

As we know that economics is a branch of social science which is concerned with man ,how he runs his economic activities, tries to satisfy his wants and achieves a higher standard of liiving in the society. The subject matter of economics revolves around wants, efforts and satisfaction. Adam Smith is considered the father of economics. He wrote a book about economics in 1776 and defines economics as "an inquiry into the nature and causes of wealth of nations". According to Robbins" Economics studies the human behaviour as a relationship between ends and limited means that have alternative use". Economics teachs us how to get maximum satisfaction from the limited resources.

The economics have been divided into two branches, microeconomics and macroeconomics. Microeconomics studies the particular indvidual behaviour or behaviour of a particular firm. while as Macroeconomics focuses on the economy as a whole (or on whole economies as they interact). It describes what causes recessions, and what makes unemployment stay high when recessions are supposed to be over. Macroeconomics addresses why some countries grow faster than others, and have higher standards of living than others. Macroeconomics involves adding up the economic activity of all households and all businesses in all markets to get the overall demand and supply in the economy. However, when we do that, something curious happens. It is not unusual that what results at the macro level is different from the sum of the microeconomic parts. Indeed, what seems sensible from a microeconomic point of view can have unexpected or counterproductive results at the macroeconomic level.

Gross domestic product:- The monetary value or monetary value of all goods and services that are produced in a country over a specified period of time is called GDP. We did not include the value of second hand goods in the GDP because it willl arise the problem of double counting of goods. The net factor income from abroad is not included in GDP. GDP is measured by income, expenditure and output method.

An equation of GDP =C+I+G+(X-M).

C = concumption.

I = Investment.

G = Govt. spending.

X-M = Net exports.

X = exports and M = Imports.

GDP is an important measure of economic growth and development. The calculation of a country's GDP encompasses all private and public consumption, government outlays, investments, additions to private inventories, paid-in construction costs, and the foreign balance of trade. (Exports are added to the value and imports are subtracted).Of all the components that make up a country's GDP, the foreign balance of trade is especially important. The GDP of a country tends to increase when the total value of goods and services that domestic producers sell to foreign countries exceeds the total value of foreign goods and services that domestic consumers buy. When this situation occurs, a country is said to have a trade surplus. If the opposite situation occurs–if the amount that domestic consumers spend on foreign products is greater than the total sum of what domestic producers are able to sell to foreign consumers–it is called a trade deficit. In this situation, the GDP of a country tends to decrease.

Hope you got the answer...

Thanks...

kindly comment for any further clearification.