Introduction to Gross Domestic Product

Introduction to Gross Domestic Product In order to analyze the health of an economy or examine economic growth, its necessary to have a way to measure the size of an economy. Economists usually measure the size of an economy by the amount of stuff it produces. This makes sense in a lot of ways, mainly because an economys output in a given period of time is equal to the economys income, and the economys level of income is one of the main determinants of its standard of living and societal welfare. It may seem strange that output, income, and expenditure (on domestic goods) in an economy are all the same quantity, but this observation is simply the result of the fact that there is both a buying and a selling side to every economic transaction. For example, if an individual bakes a loaf of bread and sells it for $3, he has created $3 of output and made $3 in income. Similarly, the buyer of the loaf of bread spent $3, which counts in the expenditure column. The equivalence between overall output, income and expenditure is simply a result of this principle aggregated over all of the goods and services in an economy. Economists measure these quantities using the concept of Gross Domestic Product. Gross domestic product, commonly referred to as GDP, is the market value of all final goods and services produced within a country in a given period of time. Its important to understand precisely what this means, so its worth giving some thought to each of the definitions components: GDP Uses Market Value Its pretty easy to see that it doesnt make sense to count an orange the same in GDP as a television, nor does it make sense to count the television the same as a car. The GDP calculation accounts for this by adding up the market value of each good or service rather than adding up the quantities of the goods and services directly. Although adding up market values solves an important problem, it can also create other calculation problems. One problem arises when prices change over time since the basic GDP measure doesnt make it clear whether changes are due to actual changes in output or just changes in prices. (The concept of real GDP is an attempt to account for this, however.) Other problems can arise when new goods enter the market or when technology developments make goods both higher quality and less expensive. GDP Counts Market Transactions Only In order to have a market value for a good or service, that good or service has to be bought and sold in a legitimate market. Therefore, only goods and services that are bought and sold in markets count in GDP, even though there may be a lot of other work being done and output being created. For example, goods and services produced and consumed within a household dont count in GDP, even though they would count if the goods and services were brought to the marketplace. In addition, goods and services transacted in illegal or otherwise illegitimate markets dont count in GDP. GDP Only Counts Final Goods There are many steps that go into the production of virtually any good or service. Even with an item as simple as a $3 loaf of bread, for example, the price of the wheat used for the bread is perhaps 10 cents, the wholesale price of the bread is maybe $1.50, and so on. Since all of these steps were used to create something that was sold to the consumer for $3, there would be a lot of double counting if the prices of all of the intermediate goods were added into GDP. Therefore, goods and services are only added into GDP when they have reached their final point of sale, whether that point is a business or a consumer. An alternate method of calculating GDP is to add up the value added at each stage in the production process. In the simplified bread example above, the wheat grower would add 10 cents to GDP, the baker would add the difference between the 10 cents of the value of his input and the $1.50 value of his output, and the retailer would add the difference between the $1.50 wholesale price and the $3 price to the end consumer. Its probably not surprising that the sum of these amounts equals the $3 price of the final bread. GDP Counts Goods at the Time They Are Produced GDP counts the value of goods and services at the time they are produced, not necessarily when they are officially sold or resold. This has two implications. First, the value of used goods that are resold doesnt count in GDP, though a value-added service associated with reselling the good would be counted in GDP. Second, goods that are produced but not sold are viewed as being purchased by the producer as inventory and thus counted in GDP when they are produced. GDP Counts Production Within an Economy's Borders The most notable recent change in measuring an economys income is the switch from using gross national product to using Gross Domestic Product. In contrast to gross national product, which counts the output of all of an economys citizens, Gross Domestic Product counts all output that is created within the borders of the economy regardless of who produced it. GDP Is Measured Over a Specific Period of Time Gross Domestic Product is defined over a specific period of time, whether it be a month, a quarter, or a year. Its important to keep in mind that, while the level of income is certainly important to the health of an economy, its not the only thing that matters. Wealth and assets, for example, also have a significant effect on the standard of living, since people not only buy new goods and services but also get enjoyment from using the goods that they already own.

Superb electric cars you should know about

Superb electric cars you should know about 5 coolest electric cars in the world No doubt, electric cars can be called the automobiles of the future. Though a lot of people only start to accept these vehicles, trying to make a step forward from petrol consuming cars. The industry develops greatly and there are a lot of descent representatives among the electric cars range, which will astonish you and will not leave you indifferent. Our nature friendly future welcomes such cars and we suggest you to reveal all design and functionality options of these progressive cars. Tesla Model X A lot of specialists consider this car the coolest for now. Tesla Model X has outstanding design; its Falcon Wing doors give it special elegancy and refinement. The interior attracts its buyers with the windshield, which is panoramic, and touch screen for functions controlling. There are three models of this car available: Model 75D, Model 90D and Model P90D. All of them have two engines and differ in battery capacity and engine power. The car can have five, six or seven seats and its price range is from 132 to 142 thousand dollars. However, Tesla Inc. already plans issue of new breakthrough model in 2019. So, let’s arm ourselves with patience and see what the company has designed for customers and whether it can surprise us. Audi R8 e-tron Cool design of this car can hardly leave someone without interest. Two electric engines, which total capacity reach more than 450 horsepower, make it possible to move with 280 kilometers per hour. Huge lithium-ion battery is located in the bottom of the car and makes it possible to have rides with the 450 kilometers without additional charging, in comparison to 215 kilometers, which could drive its predecessor. The car’s charging station requires only two hours for charging the battery. The functional capabilities and outstanding design make this car a superb model for those, who want to own an electric car. Renovo Motors Coupe Designers of the Renovo Coupe developed design of this car similar to sport car exterior of the 60-70th. The retro style, combined with the classical interior, makes this car unique and not alike others. The classical interior is distinguished by the liquid-crystal control panel and astonishes with its luxury style. Electric engine of the Renovo Coupe has the 500 horsepower capacity and enables to pick-up the speed from 0 to 100 kilometers per hour in 3-4 seconds. The maximal speed of the car equals 194 kilometers per hour, which is quite impressive, taking into account the heavy weight of the car. The approximate price of the car is about 529,000 dollars and for sure it will be available to a limited number of people, but driving this car will be a great experience for any of us. Morgan EV3 The car is made by the British constructors and represents by itself an untypical automobile. You can drive almost 240 kilometers without charging and pick up to 145 kilometers per hour. If you want to be an owner of such unusual car, be ready to spend from 40,000 to 50,000 dollars. The only thing you should bear in mind is that this automobile has no top. So there can be two options, drive this car only when the weather is fine or get adjusted to any weather conditions. Honda CR-Z prototype This electric car is distinguished from the above mentioned cars by its four engines, which together make 450 horsepower.   The car is extremely fast and is designed for sport racings. Thus, in 2015 the car won the 11th place in overall and first in the Exhibition Class at the Pike’s Peak International Hill Climb. However, the idea with four engines is great; it still requires some improvements and modifications. Presumably, Honda will deal with this question in the nearest future. Apparently, these are the coolest electric automobiles nowadays. Unfortunately, they are unavailable for ordinary people, who ride bikes to work or students, who have a lot of concerns with their academic papers and limited budget. Anyhow, follow the latest researches and constructions and you never know, maybe tomorrow you will be driving one of those cuties.