The Gross Domestic Product Explaned

The Gross Domestic Product Explained
The Growth Domestic Product simply known and referred to as the GDP; is the primary indicator that is used to measure the health and wealth of a country’s economy. The GDP is calculated by the Bureau of Economic Analysis and is usually calculated using two different methods (Word IQ, 2011).
The first method is the Income method: adding any revenues that a business or government organization earns within a year’s time does this. The second method is the Expenditure method: this method uses the monies that a business or government organization spends within the same allotted time, usually one year (Trading Economics, 2011).
The Bureau of Economic Analysis does not factor into the final projected numbers the exchange rates, the inflation, trade policies and imports or income earned from any U.S companies or an individual located outside the country. By using the equation of:
• Y= GDP
• C= consumption
• I= investments
• G= goods and services
• NX= net exports
By adding these various amounts together and factoring in the region in which the country is located as well as the population, the Bureau of Economic Analysis can decide the estimate of a particular country’s economic rating (BEA, 2011). These figures also help predict any expected growth or decline that a country may experience over the next few years.
Many individuals as well as potential investors use the projected calculations to make decision about where and when to invest. The GDP can also allow an individual to prepare for an economic downfall. By reading and understanding the GDP, a person could possibly predict an upcoming financial decline and then become better equipped to handle the situation (Trading Economics, 2011).
The main factor contained in the GDP that is useful to an everyday individual is the projections that involve interest rates. When the GDP shows that a country is experiencing an economic growth then this can cause interest rates to...