(GDP) is a monetary measure of the value Essay

Gross domestic product (GDP) is a monetary measure of the value of goods and services that are produced in a nation within a specific amount of time (Gwartney et al., 2018).GDP measures the intermediate and final goods and services for the calculation. Intermediate goods are good or materials that are used to make or sell a final product. Final goods are the final product that is sold. GDP does not measure the sale of intermediate goods. The lack of measuring intermediate goods is due to the fact that if they were measured, it would cause a duplicate in the count (Gwartney et al., 2018).In the United States, Q1 2020, the GDP was 21.5 trillion. In Q2 of 2020, GDP dropped to 19.5 trillion and in Q3 the GDP increased to 21.16 trillion. Although it does not appear that the Q4 numbers are finalized, the observation is that the GDP 21.49 trillion (Gross Domestic Product, 2020).GDP is mentioned in business news so often due to the fact that it shows that general size and growth of an economy as a whole. Growth rate of an economy is often used to understand the health of the economy. Although this is not perfect science, GDP is not a perfect measure of output and income. When GDP is calculated, some activities are omitted due to the fact that it is difficult to determine their value (Gwartney, et al., 2018). Pros of the GDP include that it is broad and shows a summarized value of health of the economy. GDP allows for growth percentage of the economy to be easily tracked and understood. GDP can also be broken down GDP per capita in order for population to be accounted for. There are a few cons of GDP as well. First, GDP does not take into account the quality of life or standards of living. GDP also does not take into consideration the income from overseas or that high inflation rates may lead to high GDP rates (Gwartney, et al., 2018).Real GDP is different due to the fact that it is nominal GDP with adjustment for inflation. Real GDP is calculated based on a formula R=N/D where R = real GDP, N = Nominal GDP, and D = GDP deflator (Gwartney, et al., 2018).

Resources:

Gross Domestic Product. (2020). https://fred.stlouisfed.org/series/GDPGwartney, J. A., Stroup, R. L., Sobel, R. L., & Macpherson, D. A. (2018). Macroeconomics: Private and public choice (16th ed.). Retrieved from https://www.cengage.com

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