Understanding And Applying Gdp And Productivity And The...

Phase 2 Understanding and Applying GDP in Economics Jack G. Schnackenberg Colorado Technical University Econ 210 Principles of Macroeconomics Dr. Joseph Keller 17 October 2015 Understanding and Applying GDP in Economics This paper takes a look into how to measure aggregate output/productivity and the wellbeing of an economy as a whole by factoring consumption, investment, government spending, net exports and imports. Gross Domestic Product (GDP) is an effective tool that can aid economist in comparing current economic situations with years past. GDP can also help make an assumption on where the economy is heading in the future. Part I Assume that Country A has a population of 500,000 and only produces one good—cars. Country A produces 100,000 cars per year. The people in Country A purchase 90,000 cars, but there are not enough cars to fulfill all the demand. They decide to import 50,000 more. The government buys 25,000 cars for its police force, and 10,000 cars are bought by companies to transport employees to other locations to work. They also export 65,000 cars to nearby countries for sale. GDP Defined To find find Country A’s GDP you must use the GDP equation (Consumption +Investment +Government Spending + Net Exports –Imports). Consumption 90,000 Consumption 10,000 Gov Spending 25,000 Net Exports 65,000 Total= 190,000 Subtract Imports 50,000 GDP= 140,000 GDP Composition The composition of GDP by percentage was able to be factored by takingShow MoreRelatedGross Domestic Product3100 Words   |  12 Pagesthat has been used for the past 80 years and is still used nowadays to measure the economic wealth is the Gross Domestic Product (or GDP). It is important to remember that the initial goal of these indexes (and particularly the GDP) is to measure and give a detailed report of the addition, subtraction and multiplication of certain numbers that compose a country’s economy. 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