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Gross Domestic Product

Economy counts as a priority to governments nowadays, a highly utilized tool worldwide to measure a country's economy is Gross Domestic Product(GDP). This paper will discuss GDP's; Definition, significance, and Fluctuation affects.

Definition

GDP is the value of the products and services that are produced in a nation for the market through a period of one year(Hall, 1998, p.535).

The Significance of GDP

Gross domestic product indicates three significant figures in a country's economy vision, which are national income, national output, and the national expenditure (Oldroyd,2007).

National income is the money generated from producing the output. Output in this context means the products/services that are domestically created.

National output is the total of products/services of all domestic companies. Domestic in this context means the companies that are inside the country.

National expenditure is the costs of the products that are produced within the country.

Products that are produced within a country can also be called as national products.

Fluctuation Effects

GDP effects some important issues in a country like; unemployment, standard of living, and investment(Borrington,1999).

Unemployment will directly be effected because, if GDP increases the level of unemployment will drop. This is due to businesses being in a healthy situation and therefore, are able to expand and offer job vacancies. However, if GDP decreases it will oppositely effect unemployment, because businesses will not be in a good situation financially and therefore firing employees would be an option to recover their economic losses.

IMPORTANCE OF GROSS DOMESTIC PRODUCT 3

Standards of living would fluctuate too, the higher the gross domestic product value, the better the standard of living. This is oppositely applied too, the lower the GDP the lower the standards of living. An economy having a high standard of living is healthy because it would benefit businesses as the population is able to buy. Therefore the more people buy products/services the more sales for business owners and of course more profit.

Investments in a country will also be effected, a country with high GDP value attracts investors because it gives an image of a population having high living standards. As discussed before high living standards means high purchasing power. But, a low value would reflect low purchasing power and this repels investors.

Conclusion

In conclusion, every well drawn economic future plan by the government should include a significant figure "Gross Domestic Product" because it locates three important aspects in economics. The three aspects are national income, national output, and national expenditure. Moreover, the higher the GDP; the lower unemployment levels, the higher the standard of living, and the higher the investments. So, a government should have a clear goal to increase the GDP.

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