The Importance Of GDP

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As we learned in chapter six and seven of macroeconomics textbook by Krugman & Wells, GDP is a measure of the wealth of a country. It is an abbreviation of the Gross Domestic Product. GDP is the value of all outcome of goods and services in a country during a particular time. GDP shows how wealthy a country is and how much the economy was active during a given period. “GDP is important because it is a leading indicator of a country 's economic health. It gives economists an idea of the nation 's financial viability” (Surbhi, 2015). GDP helps to determine the unemployment rate in a country too. If the GDP go up, it shows that the economy is wealthy and the commonwealth has low unemployment and vice versa. Moreover, it is hard to calculate …show more content…
Nominal GDP based on the standard definitions is the value of all final good and services that an economy produces at current price. Calculating based on current price it makes it hard to have exact or easy analyzing of economic growth. In nominal GDP the effect of inflation is not necessary, and it is not considered, and this makes the value of nominal GDP greater than the real GDP. “Nominal GDP is the GDP without the effects of inflation or deflation whereas you can arrive at Real GDP, only after giving effects of inflation or deflation” (Surbhi, 2015). Real GDP is the value of economic output at a constant price in a period. Economists use a base year to calculate the real GDP, and they chose a base year because thee price does not change over time. By selecting a base year, it is easy to compare two or more year, and it is a good index of economic …show more content…
Amado Kimberly explains that this is clear that a country with a large population will have a higher GDP, but it does not mean that country is wealthy. Therefore economist tries to use GDP per capita to have a better comparison between countries with different population size. The translation of per capita is per person. By dividing the GDP by the size of the population, we can find the GDP per capita. GDP per capita can be a useful index, but it is not a proper measurement of the happiness. Happiness is what people were always looking for, and it is something beyond the having more stuff. “However, GDP includes many items that do not help well-being: depreciation, income going to foreigners, and regrettable like security expenditure. Economic prosperity is a broader concept, but still restricted to material aspects.” (Bergheim, 2006, p.1).
Bergheim in his research also indicate that there are other features than the GDP is defined the standard of living. These conditions may include non-material aspects such as education, health, life expectancy and the environment. I think other things like freedom and safety also can be added to his this list to measure the standard of

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