Compiling and analyzing of the GDP (Essay Sample)

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Introduction
One significant measure of the national economy is the use of the gross domestic product. It is a measure of the national’s economy as it deals with all goods and services produced locally in a nation in a single year (Brezine 159). These goods and services include all the productions conducted by the nation’s own firms and citizens. Those productions carried out by foreign citizens and firms, and they are within the country’s boundaries are also included in the GPD.
Compiling and analyzing of the GDP
The basic formula used to determine the gross domestic product is;
Y = C + I + E + G
In the above formula, Y = GDP, C = consumer spending, I = investment made by industry, E = net export, G = government spending (Brezine 166).
As said earlier, GDP is the measure of all national productions of goods and services. To calculate the gross domestic product, one adds the components of the economy which include the measure of all the goods and services produced in that country. Most of the goods and services produced in the country are purchased locally by consumers. This makes the largest component and most stable of the economy as it is the consumer spending (C) in the United States (Brezine 168). Obtaining of consumer spending is by adding together non-durable, for example, foods and durable for instance automobiles goods. The services will include mechanic, barber and medical services.
The next part is the investments made by industries and businesses (I). When calculating the GPD, investment refer to purchase made by the industries in new production facilities or also the processes of buying new capital and putting it into use e.g. building of new factories, buying of a new truck and purchasing new software (Mankiw 201). In essence, this means that the factories reproduce as they buy new goods and services that will lead to the production of more goods and services.
The next part for calculating the GDP is calculating the net export which is the difference between all values of exports and the values of all imports. Exports are the goods and services that are produced internally in a nation, but are sold to the foreigners. Imports are services and goods that have been produced by foreigners, but are sold domestically (Mankiw 203). If the exports of a certain year exceed the imports then the GPD will increase, and if this is the opposite, the GPD will decrease.
The final part used is the government expenditure. The government buys goods and services using the tax money. The goods and services purchases are a measure of the goods and services produced. Examples of government expenditure will include hiring of the civil servants and construction of roads and public buildings (Sugimoto 225). Government expenditure does not incorporate any transfer payments such as unemployment benefits.
Relevance of GPD
Growth domestic product is a hugely useful to managers and owners of businesses in the United States in many ways. GPD indicator helps the managers and owners of businesses manage on their portfolio by providing the managers with a guideline about the state of the economy (Taylor 177). Business managers and owners in the Unites States may look at GPD of the country and according to these statistics of the nation; the economy is changing rapidly so the managers can be able to adjust their businesses.
The business managers and business owners who are planning to expand their business for instance to other countries, study of the GPD of that country are hugely advantageous to them as it will assist them decide and also compare different GPD of different countries, and this will help in deciding on where the best opportunities are.GPD is hugely beneficial has it determines which sectors are growing fast than others. For instance in the United States, the health care industry is growing fast (Taylor 180). This information is highly relevant to the managers and owners of businesses as they can expand their businesses to these sectors.
GDP as an indicator of nation’s economy can help both owners and managers of businesses in the United States with the dilemma of inflation and deflation. The GPD figures out the price levels that are prese...