What is GDP?

Topics: Economics, Gross domestic product, Macroeconomics Pages: 2 (480 words) Published: April 22, 2014
What is GDP?
GDP was initially introduced by Simon Kuznets in the year 1934 in respect to a US Congress report. Kuznets in his report cautioned against its utilization as an evaluation of welfare. In 1944 after the Bretton Woods conference, GDP turned into a vital tool for the measurement of economic condition of a country. What is GDP?

GDP or gross domestic product is the market value of entire formally acknowledged final services and goods produced inside a country within a year, or other notified period of time. The standard of living in a country can be gauged very often through per capita GDP. Per capita GDP is not an evaluation of personal income. In economic theory, per capita GDP exactly resembles the GDI or the gross domestic income per capita. GDP is connected to national accounts, which is included in macroeconomics. It should not be correlated with GNP or gross national product that allocates production depending on ownership. Why is GDP Important?

GDP comprises of investment expenditure, consumer spending, net exports and government spending and therefore it depicts an all inclusive depiction of an economy owing to which it offers handy information to investors that underscores the development of the economy through the comparison of GDP levels like an index. GDP is utilized as a measurement for majority economic and government’s decision-makers for policy formulation and planning. In respect of GDP, each component is specified with the influence of its comparative price. In macroeconomics it makes sense since prices show both marginal utility for the consumer that is individual sell at a price which others are ready to pay and marginal cost of the producer. GDP guides the investors to build their portfolios by offering them with information related to the economic condition. Computation of GDP offers the scope to understand about the general condition of the economy. A negative growth of GDP depicts poor shape of the economy. Economists use...
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