gdp and nnp

7/31/2019 GDP AND NNP

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GDP

What is GDP?

The gross domestic product (GDP) is one theprimary indicators used to gauge the health of acountry's economy

It represents the total dollar value of all goods andservices produced over a specific time period

Usually, GDP is expressed as a comparison to theprevious quarter or year

For example, if the year-to-year GDP is up 3%, thisis thought to mean that the economy has grown by3% over the last year.

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The Economy of India is the ninth largest in theworld by nominal GDP and the third largest bypurchasing power parity (PPP).

The country is one of the G-20 major economies anda member of BRICS.

The country's per capita GDP (PPP) was $3,703(IMF, 129th in the world) in 2011, making it a lower-

middle income economy


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CALCULATION OF GDP

The calculation of GDP can be done in one oftwo ways:

either by adding up what everyone earned ina year (income approach),

or by adding up what everyone spent(expenditure method). Logically, both

measures should arrive at roughly the sametotal.

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GDP = compensation of employees + grossoperating surplus + gross mixed income + taxesless subsidies on production and imports

GDP = COE + GOS + GMI +

TP & MSP & M


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Expenditure method

The expenditure method is the more commonapproach and is calculated by adding totalconsumption, investment, government spending andnet exports

GDP = private consumption + grossinvestment + government spending +(exports imports), or GDP= C+I+G+(X-M)

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US CALCULATION OF GDP

The US "National Income and ExpenditureAccounts" divide incomes into five categories:

Wages, salaries, and supplementary labour

income Corporate profits

Interest and miscellaneous investment income

Farmers income

Income from non-farm unincorporatedbusinesses

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GDP

Y= C + I + G + (X M) i.e. GDP (Y) is a sum ofConsumption (C), Investment (I),Government Spending (G) and Net Exports(X M).

C (consumption) is normally the largest GDPcomponent in the economy, consisting of private(household final consumption expenditure) in theeconomy.

These personal expenditures fall under one of thefollowing categories: durable goods, non-durablegoods, and services. Examples include food, rent,

jewelry, gasoline, and medical expenses but does notinclude the purchase of new housing.

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I (investment) includes businessinvestment in equipments for example anddoes not include exchanges of existing

assets. Examples include construction of anew mine, purchase of software, or purchaseof machinery and equipment for a factory.

Spending by households (not government)on new houses is also included inInvestment

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G (government spending) is the sum ofgovernment expenditures on final goods andservices.

It includes salaries of public servants, purchase ofweapons for the military, and any investmentexpenditure by a government.

It does not include any transfer payments, such as

social security or unemployment benefits

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GDP

X (exports) represents gross exports. GDP capturesthe amount a country produces, including goods andservices produced for other nations' consumption,therefore exports are added.

M (imports) represents gross imports. Imports aresubtracted since imported goods will be included inthe terms G, I, or C, and must be deducted to avoid

counting foreign supply as domestic.

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Externalities of GDP

GDP is widely used by economists to gauge economicrecession and recovery and an economies generalmonetary ability address externalities.

Its serves as a general metric for a nominal monetarystandard of living and is not adjusted for costs ofliving within a region.

GDP is a neutral measure which merely shows an

economy's general ability to pay for externalitiessuch as social and environmental concerns

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Externalities of GDP13

Examples of externalities include:

Wealth distribution GDP does not account forvariances in incomes of various demographic groups.

Underground economy Non-monetary economy


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ECONOMIC MARKETS14

DEFINITION:Amarket economyis an economy in which theprices of goods and services are determined in a freeprice system

Market economies do not exist in pure form, associeties and governments regulate them to varyingdegrees rather than allow full self-regulation bymarket forces

Different perspectives exist as to how strong a rolethe government should have in both guiding themarket economy and addressing the inequalities the

market produces


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CAPITALISM15

Capitalism

Capitalism generally refers to an economic system inwhich the means of production are all or mostly

privately owned and operated for profit, and inwhich investments, distribution, income, and pricingof goods and services are determined through theoperation of a market economy

It involves the right of individuals and groups ofindividuals acting as "legal persons" or corporationsto trade capital goods, labor, land and money.


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FEATURES OF CAPITALISM16

1. PRIVATE OWNERSHIP OF MEANS OFPRODUCTION

2. PRODUCTION FOR MARKET

3. PRICE MECHANISM which helps in takingdecision regarding what to produce, how toproduce and for whom to produce

4. LABOUR POWER AS COMMODITY which in a

capitalist economy is the most important and indemand

5. EXPLOITATION OF LABOUR


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FEATURES OF CAPITALISM17

6. GROWING WEALTH OF CAPITALISTS

Therefore, the two major classes found in acapitalist economy are the capitalists and the

powerful workersThere is always a process of collective bargaining

between workers and capitalists to obtain

higher wages and better working conditions forformer and capitalists also resort to counterweapons like retrenchment and lockouts


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SOCIALISM18

It is a complete social system where there issocial ownership of means of production

This system was established first in Russia after

Communist Revolution in 1917 Marx and Engels had visualized socialism as

one such system which shall ensure no-

participation of private ownership


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Features of Socialism19

1. Social ownership of means of production

2. Predominance of public sector

3. Decisive role of economic planning (pricemechanism)

4. Production guided by social benefit

5. Abolition of exploitation of labor


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Mixed economy20

The existence of public and private ownership ofmeans of production is hoe a mixed economy ischaracterized

Features:

1. Private and state ownership of means ofproduction and profit induced private business

2. Market mechanism

3. Interventionist role of State4. Public sector role is social benefit and

developmental role

5. Supportive role of economic planning

gdp and nnp

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