# Fundamentals of Micro and Macroeconomics: Calculating Gross Domestic Product - Assignment Example

Summary
The writer of the following assignment "Fundamentals of Micro and Macroeconomics: Calculating Gross Domestic Product" will provide the understanding of the economy and the variables that contribute to the growth of the GDP are of importance to the economic players…

## Extract of sample "Fundamentals of Micro and Macroeconomics: Calculating Gross Domestic Product"

Download file to see previous pages There are instances in which the price might not affect the quantity of goods supplied by the producers. Where the increased demand arising from the expected future increase in prices is accompanied by commensurate increase in the quantity supplied then no changes in price will be realized. An outward shift number ply curve will lead to maintenance of the price levels. Figure 1 From the above figure, it can be shown that the initial equilibrium a quantity is Q0 and the original price is P0. Because of the expected future increases in price, the demand curve shifts from D0D0 to D1D1 making the price increases. Because of the rise in prices, suppliers will be stimulated to increase the quantity of their supplies hence lowering the prices at the market. The shift of the supply curve from S0S0 to S1S1 changes the equilibrium quantity from Q0 to Q1 without an increase in the prices of the commodity. c) The three approaches in the determination of the GDP often results in different values. Whereas the income approach to the determination of GDP focuses on the totals of the income earned by the providers of factors of production, the expenditure approach sums the amount paid for final goods and services by the households and the government (Hansen 167). There are several reasons that cause these differences. First, the problem in double entry could have significantly caused varying values. By including intermediate goods, the GDP value could have been inflated. At the same time, the income approach to measuring the GDP might have omitted some of the income earned by the providers of factors of production. For example, the approach is prone to omitting income of the private sector due to lack of records. Some of the income of homemakers and even income from illegal activities are always omitted thereby making the total of the approach slightly lower than the expenditure approach. Nonetheless, the conflicting totals might have been caused by calculation errors. Wrong additions and inclusion of values in the calculation of the GDP always impair the accuracy of the GDP. Economists can correct the above causes in a difference in the level of GDP using the two approaches. To begin with, only the expenditure on final goods and services should be used in the expenditure approach must be used if the problem of double entry is to be avoided. Secondly, the income approach should also incorporate all the incomes of the suppliers’ of the factors of production if a correct value of GDP is to be arrived at. The income from illegal activities and those from the informal sectors of the economy like salaries of homemakers should be included. Moreover, the methods from the two approaches should be harmonized to reach an amicable value.  ...Download file to see next pagesRead More
Cite this document
• APA
• MLA
• CHICAGO
(“Micro and Macroeconomics Essay Example | Topics and Well Written Essays - 2000 words”, n.d.)
(Micro and Macroeconomics Essay Example | Topics and Well Written Essays - 2000 Words)
https://studentshare.org/macro-microeconomics/1443108-love-macroeconomics.
“Micro and Macroeconomics Essay Example | Topics and Well Written Essays - 2000 Words”, n.d. https://studentshare.org/macro-microeconomics/1443108-love-macroeconomics.
Click to create a comment or rate a document
th
thompsonkaitlyn added comment 7 months ago
Student rated this paper as
This assignment was always my weak point. I could never finish it on time. Still, after I found this particular paper, I understood how it should be completed. So, I performed my research afterward and completed the assignment in several hours, instead of months as it was previously.

## CHECK THESE SAMPLES OF Fundamentals of Micro and Macroeconomics: Calculating Gross Domestic Product

### Gross Domestic Product and Welfare

...Running Head: ECONOMICS: GROSS DOMESTIC PRODUCT AND WELFARE Economics: Gross Domestic Product and Welfare In APA format By Course Name University Economics: Gross Domestic Product and Welfare Part A. The following figure shows the reported Gross Domestic Product of three countries Canada, China, and United States during the years 1994, 1999, and 2005. The data are sourced from the International Monetary Fund World Economic Outlook Database. All the GDP are in US\$ billion and in current prices. Source: World Economic Outlook,...
4 Pages(1000 words)Essay

### How i plan to study

2 Pages(500 words)Essay

### GDP - Gross Domestic Product

...Full topic and Section # of What is GDP? Does GDP correctly describe your personal economic well being? Does it adequately explain the overall economic well being of your country? GDP or Gross Domestic Product gives the net value of the all the all the goods and services that are made by a region or a country in a certain year of twelve months. The methods of calculating GDP differ from country to country but the general formula is as follows: GDP = C + I + G + E – IM GDP provides is the addition of expenditure, invested money, government expenditure and the net exports of a country in a given year as shown above. It must be noted that GDP does not stand for the...
6 Pages(1500 words)Essay

### Gross Domestic Product (GDP)

...5 May Gross Domestic Product (GDP) is one of the tools used to measure economic performance for a nation and the global economy. It can be defined as “value of all goods and services produced in a country in one year” (The World Bank Group). GDP can be calculated by using income approach, or the more commonly used expenditure approach, which is defined with the following equation: GDP = All private consumption/consumer spending (C) + Sum of government spending (G) + Sum of investment by businesses (I) + Total Net Exports (NX) * Total Net Exports is the difference of total exports (X) and imports (M) which is calculated as (X-M) If the...
3 Pages(750 words)Research Paper

### Fundamentals of Macroeconomics

...Fundamentals of Macroeconomics Fundamentals of Macroeconomics. This paper defines a number of terminologies used in the field of economy. In addition, the paper looks into implications of some economic activities on the government, households, and businesses. These economic activities include purchasing of groceries, massive layoff of employees and decrease in taxes. Terminologies defined in this paper include gross domestic product, real gross domestic product, nominal gross domestic product, unemployment rate, inflation...
2 Pages(500 words)Essay

### Fundamentals of Macroeconomics paper

...Fundamentals of macroeconomics Introduction Economics refers to the knowledge of generation, utilization and transfer of resources while macroeconomics defines economic factors that have wide scoped effects. This paper to defines macroeconomic terms, and describes effects of identified activities on different stakeholders, and flow of resources across the entities following the activities. Definition of terms Gross domestic productGross domestic product defines the value of a country’s total terminal production of formally recognized items in a given...
2 Pages(500 words)Research Paper

### Gross Domestic Product (GDP)

...Gross Domestic Product Healthcare spending varies widely across the globe. At one end of the spectrum, there are the developed countries that spend substantial sum on healthcare and at the other; there are underdeveloped countries that spend a small percentage of their GDP on healthcare. It will be interesting to compare healthcare indicators for the US as a developed country and the one who spends large amount on healthcare with Bangladesh as a developing country and the one who spends small amount on healthcare. Healthcare Spending as % of GDP World Health Organization (2013) reports that Bangladeshs spending on healthcare in 2011 as percentage of Gross...
1 Pages(250 words)Essay

### Gross domestic product

...regulating the above factors in the hope of heading a country to healing. Importance The calculation of Gross Domestic Product GDP of countries around the world is far much important in the process of determining how a country is faring. In this case, the GDP acts as a clue in matters pertinent to financial wealth of the country through measuring standard of living in a given country. Consequently, every country develops interest in knowing about the GDP correlations to ensure a boost in the wellbeing. Some of these GDP correlations realized in every country are happy index, crime rate, corruption, income and if the country is developed or developing. it is intrinsic...
6 Pages(1500 words)Assignment

### Gross Domestic Product

...﻿Gross Domestic Product Introduction It is not the first time Gross Domestic Product (GDP) is at the verge of criticism as faulty indicator of social welfare or progress. Repeatedly scholars and economists have raised eyebrows and cautioned against the use of GDP, as a measure of factors was not originally intended for in its formulation. Consequently, it has deemed it necessary for new critics to shed light on the issue to question the extent to which GDP is effective as an indicator of progress. This volume intends to employ academic intellect and respectable economists’ ideologies to analyse critically if GDP is a reliable indicator...
8 Pages(2000 words)Essay

### Gross Domestic Product

... Gross domestic product (GDP) refers to the monetary value of all finished goods and services produced within a particular period in an economy (Mankiw, 2012). It is calculated by adding government purchases, investment, consumption and net exports. The GDP based on the provided income data is \$761.6 billion. The GDP less depreciation is the Net domestic product (NDP). According to Arnold (2010), NDP refers to the net monetary value of goods and services attributed to property and labour in specified period in an economy. Based on the national income data provided, the NDP was found to be \$738 billion. The other method of measuring the income is national income (NI) that refers to the returns that the owners of production (capital... ,...
2 Pages(500 words)Essay