Econ exam..............

A region's gross domestic product, or GDP, is one of the several measures of the size of its economy. The GDP of a country is defined as the market value of all final goods and services produced within a country in a given period of time. It is also considered the sum of value added at every stage of production of all final goods and services produced within a country in a given period of time. Until the 1980s the term GNP or gross national product was used in the United States. The two terms GDP and GNP are almost identical. The most common approach to measuring and understanding GDP is the expenditure method:

GDP = consumption + investment + government spending + (exports − imports)

"Gross" means depreciation of capital stock is not included. With depreciation, with net investment instead of gross investment, it is the Net domestic product. Consumption and investment in this equation are the expenditure on final goods and services. The exports minus imports part of the equation (often called cumulative exports) then adjusts this by subtracting the part of this expenditure not produced domestically (the imports), and adding back in domestic production not consumed at home (the exports).

It is the EXPENDITURE METHOD (AGGREGATE DEMAND) to measure the value of Gross Domestic Product (GDP). GDP measures the value of output produced (goods and services) within the domestic boundaries for a given period of time. It included the value of output of the many foreign owned firmed that are located domestically.

GDP = C + I + G + (X - M)
C : Household Spending (consumption)
I : Capital Investment Spending
G : Government Spending
X - M : Net Exports
X : Exports of Goods and Services
M : Imports of Goods and Services

Eg.
C = $50 Billion
I = $80 Billion
G = $10 Billion
X = $60 Billion
M = $45 Billion

Therefore, C + I + G + (X - M) =
$50 + $80 + $10 + ($60 - $45) Billion = $155 Billion

GDP can reflect :
1. the rate of economic growth and where the economy is in the business cycle;
2. changes to overall living standards of the population;
3. looking at the distribution of national income.