• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

GDP, or Gross Domestic Product.

Extracts from this document...

Introduction

GDP, or Gross Domestic Product measures the total value of goods and services produced in the economy over a given time period. This time period is usually yearly, but Gross Domestic Product can also be measured quarterly. There are three methods of measuring national income, and all three of them can be applied to Gross Domestic Product. They are income, expenditure and output. In theory, all three methods should produce the same outcome, but in practice differences arise due to errors and difficulties in the compilation of the statistics. Gross domestic product can be shown as follows: GDP = C + I + G + X - M where C = Consumption I = Investment G = Government spending X = Exports M = Imports I is composed of two parts. GDFCF is gross domestic fixed capital formation and secondly, net change in stocks. In order to increase the accuracy of National Income (Yn) figures when using the expenditure measure, it is necessary to remove the distorting effect of expenditure taxes and subsidies. ...read more.

Middle

There is the need to adjust for varying sizes of population. Not all countries are able to carry out an accurate census. In developed countries, such as Germany, the UK and the USA, it is relatively easy to find out the size of the population, because of birth and death registrations. However, in a 3rd World country, there would be many people who are not on such a register. For international comparisons, it is usual to translate the figures into American dollars ($US). Therefore, the extent of currency volatility against the $US may be a further distorting factor. In 1990, the Gross domestic product of China was 1,769 billion Yuan. Converted into $US, 4.78 Yuan = $1. Expressed in $US, the Chinese GDP was $370 billion. To gain the GDP per capita , this was divided by the population of 1,139 million. $370,000,000,000 = $325 per capita. 1,139,000,000 In comparison, the US in 1990 had a gross domestic product of $5,346 billion and a population of 250 million Therefore the GDP was: $5,546,000,000,000 -= $22,200 per capita 250,000,000 If the dollar had been worth a different amount against the Yuan, the figure for China's GDP may have been quite different altogether. ...read more.

Conclusion

Therefore, the countries earning the highest GDP per capita could have an average working day of 13 hours, whilst a country with a lower GDP could have an average working day of only 8 hours. All of the factors which have been mentioned above illustrate that GDP figures are valuable as indicators of standards of living, but there are many faults which can be found with this method of measurement. There are other measures of national income, which when used in conjunction with GDP per capita, may help to give a more complete picture of living standards. These include the number of doctors per 1,000 population, the number of hospital beds per 1,000 population, the percentages of houses with piped water supply, the percentage of houses with electricity supply, the percentage of the population in full-time education, the average hours worked per week, the average days number of holiday per year, the percentage of households with TV, the percentage of households with a fridge and the percentage of households with a car. The GDP figures are useful to gather a general idea of standards of living, but are more valuable when combined with other indicators, due to factors which make it a rather unfair measure of income. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Macroeconomics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Here's what a star student thought of this essay

5 star(s)

Response to the question

The question isn't stated here, but from what is written I can assume it's similar to "How useful are GDP figures for measuring standard of living?". This essay responds very well to this task, beginning with some basic knowledge of ...

Read full review

Response to the question

The question isn't stated here, but from what is written I can assume it's similar to "How useful are GDP figures for measuring standard of living?". This essay responds very well to this task, beginning with some basic knowledge of GDP and then assessing it's benefits and limitations. There is plenty of numerical analysis, which is vital in this question as there isn't a natural diagram. I liked how they come to a conclusion suggesting they are useful when combined with other factors, as this shows insight without sitting on the fence. This essay could've gone further by discussing GDP measured with purchasing power parity, or gone into talking about developing countries and whether HDI is more useful.

Level of analysis

The analysis here is superb. The definition of GDP is exactly what exam boards want to see, including the keywords of "total output" and "over a defined period of time". There is strong awareness that GDP must be adjusted for inflation, but it was a shame they didn't mention real GDP in this explanation. Whereas, there is a good awareness that the GDP must be shown as a figure based on the population, and then goes to use the technical term "GDP per capita". Being able to use technical terms will show strong understanding and thus gain credit. There is perceptive awareness that GDP per capita is an average, and doesn't take into account what goods and services are outputted. I would've gone on to say that inequality must be looked at, maybe through the Gini coefficient or Lorenz curve. There are numerous points explained here which show the limitations of GDP as a measure, and such there are plenty of places where an examiner can give marks. It doesn't jump to conclusions, but explains each point by clearly showing how each step affects the next. Whilst this may seem simple, too many people miss out steps and this shows a lack of understanding.

Quality of writing

The essay has a good structure. I liked how there was a progression from knowledge to analysis and then evaluation, as this is a style examiners like. Economics essays are marked on a number of levels, and such progression allows easy mark allocation. The style is strong and allows for a convincing argument. Spelling, punctuation and grammar are fine.


Did you find this review helpful? Join our team of reviewers and help other students learn

Reviewed by groat 19/03/2012

Read less
Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Macroeconomics essays

  1. Peer reviewed

    How can inflation be reduced?

    5 star(s)

    An exchange rate is the value of a specific currency in the foreign currency market. For example the value of the Japanese Yen in comparison to the American Dollar. There are two types of exchange rates, the majority of countries have a floating exchange rate, this means it is determined

  2. Examine possible factors which might have led to changes in the value of the ...

    state of the EU it allows free movement of labour and EU citizens across its border thus meaning that movement of people would not bring about a significant change. A devaluation may help export dependent businesses however not all firms in the British economy are structured like this.

  1. "Consumption is determined by Income"

    This means that the consumption function is relatively stable and so it is not subject to frequent large scale shifts. Over the past 60 years, there does not seem to be any indication that households are reducing their likelihood to consume as income increases; therefore Keynes has been proved wrong.

  2. Budget 2004-05 and Economic Analysis of Pakistan

    being seriously undermined by lack of adequate infrastructure of roads, water, power, gas and telecommunications. The need for major increase in development spending aimed at rehabilitating and expending the economic and social infrastructure is there for extremely pressing. Lack of desired capacity in the system to fully absorb available investment

  1. Governments set economic objectives - Discuss the relative importance of each of these objectives ...

    reducing trade union power and introducing minimum wages will ease this problem. The natural rate of unemployment can be reduced according to classical economists, by making the economy produce more efficiently. Keynesians believe that increased investment in both human and capital projects will improve the situation.

  2. How have the Rates of Inflation in the UK Changed Since the Monetary Policy ...

    However this data does bring into question the importance of the MPC in controlling this inflation. This is because the data also shows that the levels of RPIX inflation have been within the government tolerance since the beginning of 1993, which is when Norman Lamont, the Chancellor of the Exchequer

  1. Indian Economics

    5% 3 1961-1966 5.6% 4 1969-1974 5.7% 5 1974-1979 4.4% 6 1980-1985 5.2% 7 1985-1990 5% 8 1992-1997 6% 9 1997-2002 7% *Some figures are rounded off. The Net National Product has risen in the following manner Year Net National Product (N.N.P)

  2. What ended hyperinflation in Germany, Austria and Hungary in the 1920s? Do the facts ...

    The Rentenbank made clear its intent to meet its obligation to limit government borrowing in the test by the government in December 1923. At the same time, the government stopped additional borrowing from the central bank. Simultaneously, in order to balance the budget, the government took a series of deliberate actions to raise taxes and cut expenditures.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work