Essay on Economics And The Determination Of National Income

804 Words Dec 2nd, 2014 4 Pages
We all know that economics is a social science, therefore it is very essential in our social life. One of economics’ main objective is to help our society decide the optimal allocation of our limited resources. One of its many branches, macroeconomics, is the study of national economics and the determination of national income.
In this assignment, I aim to explain the definition of Gross Domestic Product, how it is calculated and using GDP as a good measure of the economic well-being. What is GDP? We need to answer this question. According to M.Parkin, ‘’ GDP or Gross Domestic Product is the market value of all the final goods and services produced within a country in a given time period” (Parkin M, (2008) Economics, 8th edition). It usually measures the value of production a quarter if a year. It is also used to measure the general health of the economy. “Countries seek to increase their GDP in order to increase their standard of living. But growth in GDP does not result in increased purchasing power if the growth is due to inflation or population increase. For purchasing power, it is the real, per capita GDP that is important” ( [Accessed 2 Dec. 2014].
The result of these calculating approaches is abstractly same. GDP calculates only final goods and services that users consume. The transitional goods and services are unable to add the calculation to avoid the double counting in same economic area. A standard way of calculating gross…

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