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Components Of Gdp Analysis

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Gross Domestic Product is defined as the monetary value of all the final goods and services produced within a country during a given period of time. It measures the economic progress of a country and is also used to estimate its standards of living. GDP is the value of the aggregate output in an economy. It measures the total income and expenditure in the economy. GDP is made up of four components, all of which affect it differently. These components are appropriately represented by the national income identity, which states that GDP is the sum of household consumption, investment by firms, government purchases and net exports. This essay will analyze the role played by these components and their varying degrees of influence on total GDP by …show more content…

It is particularly useful during periods when consumption and investment are too low to ensure economic growth. On average, government spending contributed 20.82% to GDP in UK and 18.78% in Germany. The period witnessed an annual average growth rate of 1.12% in UK and 1.73% in Germany. It is possible to achieve long run economic growth by government spending which helps increase incomes. The effect of government expenditure on GDP should not be ignored. Net exports is the difference between the the total value of exports and imports of goods and services in a country. It is an important variable in GDP calculation. There is a positive balance of trade in an economy when the value of exports is greater than the value of imports. A negative balance of trade arises when the value of imports is greater than the value of exports. In Germany, net exports contributed positively to growth by being responsible for an average of 5.8% of the GDP during the given period. In UK however, the effect that next exports had was negative. It contributed -2.3% on average to GDP from 2007 to 2014. The fact that the UK

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