Gdp vs Gnh Essay

1796 Words Aug 17th, 2012 8 Pages
Economy is very important for every country. Why is it? It is basically because the World we live in is made up of individual countries which are occupied by the human beings. As the basic needs of the human being are food, clothing and shelter, people are in need of income to finance the purchases of these needs. In order to receive an income, there must be a job which you are getting paid to get it done. Therefore, if the economy of a country is not good, there will not be jobs to offer to the public. Then the people of the country will not be able to fulfil their needs. But how can we know if a country’s economy is good? The answer is to invent something to measure the economy. Economists tried out many different methods time over time. …show more content…
It doesn’t include the private bank transfers between individuals and government transfer payment for housing benefit, social security payment, income support given to families with low income and jobseeker’s allowance given to the unemployed.
Net Exports is the difference between exports and imports. Imports are subtracted from the exports since GDP is defined as the output of the economy of a country.
The income approach
The second method of measuring GDP is the income approach. It is calculated by adding up all the incomes by the households and firms in every year. The households and the firms receive their incomes in the form of profit, salaries and interest income which are the expenditures of final goods and services produced. Therefore, adding up all these salaries, interest and profit would be the same amount of GDP as it is measured by the expenditure approach.
The product approach
The product approach measures economic activity by adding the market values of goods and services produced, excluding any goods and services used up in intermediate stages of production. This approach makes use of the value‐added concept. The value added of any producer is the value of its output minus the value of the inputs it purchases from other producers. The product approach computes economic activity by summing the values added by all producers.

Difficulties in measuring GDP
There are some problems which cannot be

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