Fundamentals of Macroeconomics Essay

867 WordsAug 26, 20134 Pages
Fundamentals of Macroeconomics Paper Erlyn Cruz ECO / 372 Michael Polakoff June 10, 2013 Part 1 Gross domestic product (GDP) Is the value of a country's overall output of goods and services (typically during one fiscal year) at market prices, excluding net income from abroad. Gross Domestic Product (GDP) can be estimated in three ways which, in theory, should yield identical figures. They are (1) Expenditure basis: how much money was spent, (2) Output basis: how many goods and services were sold, and (3) Income basis: how much income (profit) was earned. These estimates, published quarterly, are constantly revised to approach greater accuracy. The most closely watched data is the period to period change in output and consumption, in real (inflation adjusted) terms. If indirect taxes are deducted from the market prices and subsidies are added, it is called GDP at factor cost or national dividend. If depreciation of the national capital stock is deducted from the GDP, it is called net domestic product. If income from abroad is added, it is called gross national product (GNP). The main criticisms of GDP as a realistic guide to a nation's well-being are that (1) it is preoccupied with indiscriminate production and consumption, and (2) it includes the cost of damage caused by pollution as a positive factor in its calculations, while excluding the lost value of depleted natural resources and unpaid costs of environmental harm. (Business Dictionary) Real GDP An economic assessment that involves quantifying the inflation adjusted market value of goods and services produced by an economic system during a given time. A business might use the real gross domestic product (real GDP) of a nation to indicate the standard of living within that country that can help them determine whether or not

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