Question

1. What is the true measure of the wealth of a country? GDP or GNP? Explain.
2. Explain the expenditure approach for measuring GDP.

Answer 1

Gross Domestic Product (GDP) and Gross National Product (GNP) are used most commonly to measure aggregate output of a country. These two measures constitute the market value of all the goods and services during the financial calendar.

We can tell GDP is the true measure of the wealth of a country. because the GDP is the the indicator of the domestic product of a country while GNP is indicating how its citizens are contributing to the countries economy, which includes people living abroad and peiple living domestically.

GDP calculate the aggregate value of goods and services produced within the country, by both citizens and non citizens of that country.

THE EXPENDITURE APPROACH OF MEASURING GDP

The expenditure method is used widely for measuring the GDP. The expenditure method use to measure the GDP by considering the sum of all final goods and service consumed during a period of time. This consumption coop all consumer spending, spending by the government, net exports and business investment spending. Ultimately the quantity of the resulting GDP is same as the aggregate demand because both use similar formula.


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