Gross domestic product (GDP) is taken as a measure of the national economy and is typically used to express growth or contraction of an economy in a given time. However, the action is commonly taken for showing an economy or large area like a country although it can also be used for small areas within a state. Furthermore, different approaches are utilized in the derivation of the concept and irrespective of the method used, same results are obtained. Many variables are included in the calculation and usually, once a country experiences a growth more than two percent it is a good reflection as it portrays that there are significant activities that are promoting the growth of the economy. However, in case a country experiences occasions of contraction that takes continuously three months, it means that the country is experiencing recession is a negative growth of the economy Chang & Li (2015).
A. GDP = C + G + I + (X-M)
G= Government purchases
C= Consumption
I= Investment
X= Exports
M= Imports
Therefore, GDP = 90, 000 +25 000 + 10, 000 + (65,000-50,000) = 140, 000
Hence, it is evident from the above figures that the country produces about 140,000 cars every year.
B. GDP per capita refers to the average amount of goods or services that is produced by an individual, and the value is derived by dividing GDP by a country's population.
Therefore, GDP per capita = GDP/Population = 140,000/500,000 = 0.28
Hence, it, therefore, implies that on average, every individual produces about o.28 cars every year.
C. GDP composition
Consumption percentage = (90,000/140,000)*100 = 64.29%
Government purchase percentage = (25,000/140,000)*100 = 17.86%
Investment composition = (10,000/140,000)*100 = 7.14%
Net export composition = (15,000/140,000)*100 = 10.71%
Keynes was an economist and according to his arguments, he asserted that full employment can only be achieved if at all the employees are willing to be flexible when it comes to matters of payment. He further states that government spending is important as it helps release the private sector stating that if activities in the market would lessen, it will lead to unemployment. Through this concept of fiscal and monetary measures, he was able to alter the adverse effects to the economy due to recession or depression. The above example of country A portrays a country that is not able to produce enough goods on its own an aspect that make the government step in hence through the purchase; the country can possess more cars for use (Barefoot et al., 2015). The concept leads to increased efficiency hence an increased amount of money is made which is good for the economic growth of a country. Hence, the Keynesian theory helps explain that without government assistance, the country will experience loss-making an aspect that may lead to a recession.
According to the bureau of economic analysis (BEA), it is evident that the real GDP for the US grew significantly by about 5% indicating the fastest growth in the past decade. It is usually a monthly reflection of the country’s growth regarding merchandise produced in the state, labor progress among other economic indicators.
The largest component of the U.S GDP is personal consumption, which comprises of 66.4% (Components of GDP, 2015).
Net exports is the smallest component of the U.S GDP and comprises of 13.5% (Components of GDP, 2015).
The report is often produced on a quarterly basis and as per the last result released, it was evident that Real GDP shot up by 3.1% a figure that overrode the given estimate an indication that the US economy was recovering.
Presently, the fastest growing components of GDP include the investment that is experienced by the private sector, government spending, and exports.
Contrarily, the sale of computers was found to have the least contribution to GDP as it only contributed to about 0.11% that was a minute figure as compared to the fastest growing component that was the GNP (BEA, 2014).
Finally, the price index is currently at 2.7, and an aspect that contributes to its significant change is the GNP (gross national product) that varied by about 2.9% in the last analysis.
References
Barefoot, K. B., Morgan, E. T., & Shadrina, K. E. (2015). The 2015 Annual Revision of the Industry Economic Accounts. Survey of Current Business, 95(12), 1-16.
BEA, (2014). U.S. Department of Commerce, Bureau of Economic Analysis. Retrieved 16 Jan 2015 from http://blog.bea.gov/category/gdp/
Chang, A. C., & Li, P. (2015). Measurement Error in Macroeconomic Data and Economics Research: Data Revisions, Gross Domestic Product, and Gross Domestic Income. Working Papers -- U.S. Federal Reserve Board's Finance & Economic Discussion Series, 1-54.
Components of GDP – US Economy (2015). Retrieved 16 Jan 2015 from http://useconomy.about.com/od/grossdomesticproduct/f/GDP_Components.htm
