Business Economics Essay Example | Topics and Well Written Essays - 4000 words

Business Economics - Essay ExampleWessels however points out that this does not inevitably mean that the citizens of the US have better living standard than their counterparts in the UK. (21). GDP therefore cannot be used as the sole factor in measuring the living standards of the citizens of a country. However chances are that a country with a high GDP has a better standard of living than that with a low GDP.So what encompasses GDP Well there are a number of components which when added together make up the GDP of a country. According to Sowell, they include role which is denoted by letter C, Investment which is denoted by letter I, spending by government and fin every last(predicate) toldy exports and imports denoted by letter X and M respectively. Consumption refers to all the money spent by citizens of a country in vitiateing goods and services which they expect will satisfy their needs. This includes money spent on food, barter for of new clothes as well as entertainment. (5 0-51)Sowell further notes that spending by the government is another component of the GDP. For example the UK government spends money to buy new military equipment and also pay its workers. (70).This expenditure is also part of the countrys GDP. Investments into an economy are also used in calculation of the Gross home(prenominal) Product. ... To get the accurate nurse of GDP economist add the value of all goods produced in a country and then subtract the value of all goods which are imported. The total components of GDP is expressed mathematically as Y=C+I+G+(X-M). (Sowell 80-81)Wessels notes that measuring GDP is critical if economists are to congeal the rate of growth of an economy. In measuring GDP economists use two major methods, the expenditure method and the income approach. (qtd.in Wessels 71). The expenditure approach involves adding the total amount of money of money spent on final goods. In this case, GDP equals C+I+G+ (NX) where NX represents gross exports. The inco me approach involves adding all the income received by citizens of a country either through compensation, income from rental property, and profits of corporate organizations. Mathematically this can be expressed as GDP= Employee Compensation+Rental Income+ corporeal Profits+Net Interest+Proprietor profits.UK GDP Figure for the year 2009 The GDP of the UK is estimated to be worth 315.5billion.What does this meanThe figure indicated above means that the total value of all goods produced in the UK in the 2008 to 2009 financial year amounts to 315.5 billion. This makes it the sixth largest economy in the world and third largest in Europe.How well did the GDP grow in 2009In measuring the GDP of an economy, economists divide a given year into quarters. The growth of the economy in each quarter is measured and then a comparison is made with the previous quarter so as to note the difference which constitutes actual growth.(Wessels 55). For instance in the UK economy, GDP fell by 0.4% in the third quarter of 2009. In the second quarter of the same year GDP declined by a value of 0.6%. In