The Components Of The Gross Domestic Product (GDP)

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What is Gross Domestic Product (GDP)? It is defined as, ‘The value of a country’s overall output of goods and services at market prices, excluding net income from abroad.’ There are three ways it can be estimated, expenditure basis-the amount of money spent, output basis-the amount of goods and services sold, and income basis-the amount of money earned. The estimates are published on a quarterly basis. (GDP 2016)
The most common way the gross domestic product is expressed, as a comparison to the previous year or quarter. An example of this is if the year-to-year gross domestic product is up 5%, it is thought to mean the economy has also grown by 5%. It is complicated when it comes to measuring gross domestic product. There are two
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The expenditure approach includes the expenditures involved in production and consumption. Y= C + I + G, this is the formulation for the expenditure approach. The C is for consumption by each household in the economy, such as buying a shirt, cell phones, or food, which are also called private final consumption expenditures. I is for investment expenditure, this is the production in the economy. This happens when a company buys new equipment and or machines to help in the production of a product. G is for expenditures that have been made by the government and or public institutions toward services in the economy. (Socratic …show more content…
The reason for this is because countries that are more populated have a higher gross domestic product per capita, there are other reasons why it is not a good form of measure. There are things that are left out of the gross domestic product measure, such as free time, or leisure time. If we give into the pressure to only work four days a week, that extra day off will have a negative effect on the gross domestic product number. This is because the gross domestic product is the total of output. So if there is a country with overworked and sick people but has a high gross domestic product it would mean that it is a poor well-being measure. Measuring the total production and per capita only gives us an average output per person, however it never tells us how it is divided per person. There are some products and services that can lower our well being. This is done by expenditure on the military, police, security, and services for drug addicts and lawsuits. The gross domestic product also does not look at the negative effects on our environment, not stopping to realize that we may be polluting our waters, soil, and air. (Econ

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