What is GDP? Write down the components of GDP. Why do we care about the GDP and its growth?

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Expert Solution

GDP is the value of the final goods and services produced within an economy in a given period of time.

GDP of an economy can be measured by summing up the four components - Consumption spending, investment spending, government spending and net export (net export = export - import).

We care about GDP because it measures an economy's well being. The growth of the GDP tells us whether the economy is growing or contracting. That is, when compared to prior periods, GDP growth tells us whether an economy is expanding by producing more goods and services or contracting and creating unemployment. It also tells us how the economy is performing relative to other economies around the world.

Rahul Sunny answered 1 year ago

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