Answer both questions: 1. Explain what GDP is. What are the problems associated with the use of GDP as a measure of economic well being? Briefly discuss each. [40%] 2. Explain with the help of a numerical example how the quantity theo

p Answer both questions

1 . Explain what GDP is . What are the problems associated with the use of GDP as a measure of economic well being ? Briefly discuss each . [40 ] 2 Explain with the help of a numerical example how the quantity theory 1 . Explain what GDP is . What are the problems associated with the use of GDP as a measure of economic well being ? Briefly discuss each

Gross Domestic Product or GDP is defined as the market value of all final goods and services produced within a country in a given

period of time . It is used for measuring the economic well being of a country Gross Domestic Product is identical to the Gross National Product but they are entirely different because GDP is about the region 's income which was generated inside the region while Gross National Product (GNP is a measure of the accumulation income to a region

The most commonly used approach to measure the Gross National Product of the region is the expenditure method or the aggregate demand using the equation (tutor2u , 2007

Gross National Product consumption (C investment (I (government expenditures (G (exports -imports (X-M

Consumption is referred to as the include the purchase of currently produced goods and services out of the income or from the savings or from the borrowed funds . Investment is referred to as the production per unit time of all the goods which are not consumed but are to be used by the region for future purposes Examples of the investment goods are the tangibles like buildings and non-tangibles like the on-the-job-training . Government expenditure is referred to as the government purchases which can be generated from seigniorage an taxes . Seigniorage is the money created for government funding when devastating consequences occur in a country (typhoons , high inflation rate etc . Export is referred to as the any good or commodity shipped to another country legitimately which is used in trade . Import is referred to as any good or commodity brought into one country from another country which is legitimately done . Goods or services that were imported are provided by the foreign producers

Other approaches in measuring the Gross National Product of the region are by using the other two methods . The Income Method or the Sum of all Factor Income is another method to measure the GDP of the region Another method for GDP measurement is the Output Method . Output method is used to measure the worth of the all the product produced by the productive areas in the economy . The value of the products is measured by using the value added approach . Value added approach is being used as a measurement because it prevents the scenario of double counting . Value added is the increment of the worth of the produced product in each of the successful stage in the process of production in the region (tutor2u , 2007

There are problems that involving the use of the Gross National Product as a measurement for the economic well being of the...