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Running Head: DATA EXERCISE 1 ECON 201 Data Exercise 1: Gross Domestic Product Instructor: University of Maryland University College
Data Exercise 1 Part 1: Expenditures Approach to Calculating GDP To measure a country’s economy, the Gross Domestic Product (GDP) is the total value of the final goods and services produced by all people and companies within the geographical boundaries of that country in a given period (Amadeo, K., 2017). The expenditures approach is the most widely used approach to measure the GDP. To calculate the expenditures approach there are four main categories that go to the GDP. The consumption by households, investment by businesses, government spending on goods and services, and net exports, which are equal to exports minus imports of products and services (Staff, I., 2016). The Nominal GDP and the Real GDP are both used to show a country’s economy. The Nominal GDP uses raw measurements from the four categories to include price increase. Real GDP calculates the rise in prices resulting from inflation in the economy and is compared to the costs of a base year (Amadeo, K., 2017). Real GDP provides a much more accurate up to date assessment of the country’s economy because it shows the actual growth rate of the current economic output being measured at base year prices, whereas, nominal GDP shows current output at the current prices. During inflation, the nominal GDP is higher than real GDP, because real values are adjusted for inflation, while nominal values are not. Table 1 shows, the 2nd quarter of 2017, the nominal GDP was \$19,250 billion and in the 3rd quarter was \$19,495.5 billion. The percentage change in during this time frame was 1.28%. The real GDP in the 2nd quarter of 2017 was \$17,031.1 billion and increased to \$17,156.9 billion in the 3rd quarter. The percentage change from the 2nd to the 3rd was only a 0.74%. An increase in economic productivity, personal consumption expenditures, private investments, exports of goods and services and government consumption and investments can all account for an overall increase of the nominal and real GDP from the 2nd quarter of 2017 to the 3rd quarter. Table 1 2016 2017 1
Data Exercise 1 Nominal GDP Q4 Q1 Q2 Q3 Gross domestic product 18905.5 19057.7 19250 19495.5 Personal consumption expenditures 13056.9 13191.6 13307 13434.7 Gross private domestic investment 3126.2 3128.7 3178.1 3241 Net exports of goods and services -564.3 -582.8 -567.2 -531.7 Government consumption expenditures and gross investment 3286.8 3320.2 3332.1 3351.5 2016 2017 Real GDP Q4 Q1 Q2 Q3 Gross domestic product 16851.4 16903.2 17031.1 17156.9 Personal consumption expenditures 11702.1 11758 11853 11922.1 Gross private domestic investment 2905.7 2897 2924.7 2967.5