Question

explain GDP properly

introduction

why you like this topic in economics

Answer 1

Gross Domestic Product (GDP) is one of the most widely used measures of an economy’s output or production. It is defined as the total value of goods and services produced within a country’s borders in a specific time period — monthly, quarterly or annually. GDP is an accurate indication of an economy's size. The GDP growth rate is probably the single best indicator of economic growth. However, GDP per capita has a close correlation with the trend in living standards over time.

Samuelson and Nordhaus neatly sum up the importance of the national accounts and GDP in their seminal textbook “Economics.” They liken the ability of GDP to give an overall picture of the state of the economy to that of a satellite in space that can survey the weather across an entire continent. GDP enables policymakers and central banks to judge whether the economy is contracting or expanding, whether it needs a boost or restraint, and if a threat such as a recession or inflation looms on the horizon.

The national income and product accounts (NIPA), which form the basis for measuring GDP, allow policymakers, economists and business to analyze the impact of such variables as monetary and fiscal policy, economic shocks such as a spike in oil price , as well as tax and spending plans, on the overall economy and on specific components of it. Along with better-informed policies and institutions, national accounts have contributed to a significant reduction in the severity of business cycles since the end of World War II.

Gross domestic product (GDP) is one of the most common indicators used to track the health of a nation's economy. It includes a number of different factors such as consumption and investment. It's also a key factor in using the Taylor rule. In this short article, we look at why GDP is such an important economic factor, and what it means for both economists and investors.

It represents the total dollar value of all goods and services produced over a specific time period, often referred to as the size of the economy. GDP is usually expressed as a comparison to the previous quarter or year.

GDP can be expressed in two different ways—nominal and real GDP. Nominal GDP takes current market prices into account without factoring in inflation or deflation. This figure looks at the natural movement of prices and tracks the gradual increase of an economy's value over time.

This is in contrast to real GDP which does factor in inflation or the overall rise in of price levels. Economists generally prefer using real GDP as a way to compare a country's economic growth rate. It is calculated using a price deflator—the difference in prices between the current and base year, which is the reference year. This is how economists can tell whether there is any real growth between one year and the next.