What exactly is GDP

What exactly is GDP - GDP Or Gross Domestic Product can be...

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GDP, Or ‘Gross Domestic Product’ can be defined as the comprehensive measure of the total market value of all currently produced final goods and services within a country in a given period of time (usually a quarter) by domestic and foreign-supplied resources (Farnham p.492). GDP looks at three variables – Economic Growth, Employment and inflation. With this being said, GDP helps in defining where the U.S. is in the business cycle. There are four stages – Peak, Contraction (aka - recession), Trough (aka – depression) {which will probably never happen because the Government will step in with fiscal and monetary policy} and finally Expansionary (aka - recovery). The United States has been steadily declining into a recession since the year 2008 – with only some signs of life of the tides turning here in the last quarter of 2009. According to the Bureau of Economic Analysis, GDP has really been allover the page – starting at fourteen point three trillion at the first quarter of 2008, dropping to a low of fourteen point one trillion in the first quarter of 2009 and just now rising back up to fourteen point four trillion in the fourth quarter of 2009. In essence GDP increased five point seven percent in the fourth quarter of 2009 (Mataloni, 2010, para 2). But what exactly does that mean? Well it simply means that no one has been buying anything until recently. According to the Beau of Labor Statists, the Consumer Price Index shows that consumer spending has been slightly increasing as well. In the first quarter of 2009, CPI was sitting at two hundred and eleven and now at the first quarter of 2010 – it is sitting at two hundred and sixteen. Now, it is interesting to point out that the CPI was sitting around this number in the November of 2009, when the U.S. was in a recession. So, CPI is indeed growing, and it is sitting at a two point seven percent increase for 2009 – but it is a small growth at best and 1
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we are just coming back to where we were in November (“Consumer Price Index,” 2010). One could argue that people are only buying goods that are needed and not wanted
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This note was uploaded on 02/27/2011 for the course ECON 550 taught by Professor Tracy during the Winter '10 term at Strayer.

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What exactly is GDP - GDP Or Gross Domestic Product can be...

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