Part 1: Expenditures Approach to Calculating GDP
2. The process of inflation significantly influences the value of nominal GDP. The real GDP is calculated with a view to present real economic situation on the basis of GDP and other financial indicators of particular year. The real GDP presented in the table is calculated on the basis of chain-type quantity index as well as 2009 current-dollar value of the corresponding series. Therefore this index weights more than one period simultaneously being more reliable determinant of economic development. The nominal GDP of all the periods is greater than the real GDP that proves the phenomenon of inflation comparing to basic year (2009).
The percentage change in nominal GDP of the third quarter 2016 compared to the previous quarter is ((18,675.3/18,450.1) – 1) * 100%. It equals 1.2%. Such percentage change clearly indicates a tendency to growth of the nominal GDP being also represented by the real GDP. The percentage change in real GDP for the two quarters is ((16,727.0/16,583.1) – 1) * 100%. It equals 0.86%. The difference of these indicators may also be explained by the level of inflation that influenced the nominal GDP. At the same time both indicators do not significantly differ from 1%. As a result of considering nominal and real GDP volumes the GDP deflator could be calculated. It shows the ratio of nominal GDP to real.
Part 2: Income Approach to Calculating GDP
GDP is the total value of products and services produced within the territory of the country regardless of the nationality of enterprises being calculated on the so-called territorial basis. At the same time, GNP is the total cost of products and services manufactured both within the country territory and abroad. It is calculated on the basis of nationality. Therefore, GNP differs from GDP by the amount of income received as the result of the use of national resources abroad. GNP is calculated as GDP plus net factor income from abroad. GDP is defined as more accurate determinant compared to GNP.
National income is the total annual value of goods and services, describing contribution of the manufacturer to social welfare. It is calculated by subtraction of the indirect taxes on business, such as excise duties, sales tax, and customs duty from the net national product. National income also equals the gross domestic product minus consumption of fixed capital. As for the last 4 quarters, GNP was significantly higher than NI (by approximately 3400 billions of dollars). The personal income as well as the corporate income is the most influential component of NI.
Part 3: GDP in Different Countries
On the basis of GDP per capita the countries chosen for analysis could be listed from highest to lowest as following: Qatar, US, Germany, United Arab Emirates, Italy, Spain, Belarus, Armenia. The order of countries based on the total GDP: US, Germany, Italy, Spain, Qatar, Belarus, Armenia. Two lists are different because GDP per capita depends on the country population. Qatar was listed to be the first in the list on GDP per capita despite the fact that its total GDP is not the highest one. It may be explained by the fact that Qatar has small population. At the same time, the number of US population is high. Therefore despite the highest GDP ratio, US are listed the second in the list of GDP per capita. This principle of explanation may be applied to analysis of positions of other countries in the two lists. It should be noted that Armenia is listed to be the last in both lists. At the same time the overall tendencies are presented both by GDP per capita and GDP lists.
Part 4: Index of Economic Freedom
Keeping in mind the fact that there are no available data on GDP 2016 of different countries, the indicators 2015 were applied for the previous part of the assignment. In order to set reliable comparison base, it is important to mention that the indicators of economic freedom reflects the situation of 2016 year. Such decision was taken after comparison of 2015 and 2016 indexes of economic freedom, as the key tendencies and ranks of the analyzed countries remained the same. In general, there is strong tendency that high position is the rating of economic freedom is associated with high position in GDP. At the same time, despite having the largest GDP in the world US started to lose its position on basis of economic freedom. Nevertheless, the index of economic freedom is high enough and this country was rated 11. Germany with its big GDP was rated 18 that is also positive result. It should be noted that Armenia having smaller GDP comparing to Belarus is rated significantly higher in the rating of economic freedom. Armenia is listed 54, whereas Belarus is 157. It may be explained by the strong government interference within national economy of Belarus. Italy also changed its relative position in this list compared to the previous part of the assignment. Qatar was rated 34 that is quite good result for this country keeping in mind internal political and economic factors. The United Arab Emirates are listed 25 having rather average GDP in previous part of the assignment.
References
(2016, January 8). Retrieved from The Bureau of Economic Analysis : www.bea.gov
(2016, January 5). Retrieved from Index of Economic Freedom: http://www.heritage.org/index/country/unitedstates
Economic indicators. (2016, January 9). Retrieved from Databank of Worldbank: http://databank.worldbank.org/
