Gross Domestic Product (GDP) To Measure Of Economic Growth
Principle of Economics
Gross Domestic Product
Explanation about GDP
A country that experiences positive economic growth will have more money to spend. How to measure growth of economy? We use gross domestic product (GDP) to measure it.
The value of GDP is determined by measurement of monetary terms and inflation. Increase in value of GDP is not a true valuation of the economic growth. Economic growth in a country happens when the real level of GDP increases as a result of rises in the tangible output of goods and services in an economy.
Gross domestic product (GDP) is the total value of goods and services generated in a country in a year period of time – real GDP is always adjusted to take care of inflation.
Every country needs substantial
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Increase in economic resources , such as a higher level of work force or discovery of new natural resources such oil, gas and coal. This increase will lead into higher outputs.
3. Increase in productivity means higher output with the same amount of resources. For instance, as labour are getting more skill, they will likely be producing higher output.
Components of GDP
GDP (Y) is the sum of consumption (C), investment (I), government spending (G) and net exports (X – M).
Y = C + I + G + (X − M)
Here is a description of each GDP component part :
• C (consumption) is normally the largest GDP component in the economy, consisting of private (household final consumption expenditure) in the economy. These personal expenditures fall under one of the following categories: durable goods, non-durable goods, and services. Examples include food, rent, jewelry, gasoline, and medical expenses but does not include the purchase of new
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