GDP AS AN INDICATOR

GDP as an Indicator



GDP as an Indicator

Introduction

Economic growth is the sustainable increase in production. (Barro 2004, Pg. # 1)

Economic Growth Indicator

Gross domestic product is the economic growth indicator that is the monetary value of goods and services produced by an economy in a given period. GDP Product refers to added value, internal refers to the production within the boundaries of an economy, and GDP refers to the variation not accounted for inventory and depreciation or appreciation of capital. (Frumkin 2006, Pg. # 255)

Importance of growing GDP

Indicates the competitiveness of enterprises. If the production of Mexican firms do not grow at a faster pace means that you are not investing in new businesses, and therefore job creation does not grow at the desired pace.

If GDP grows below the inflation means that wage increases tend to be lower than it. GDP growth is more revenue for the government through taxes. If the government wants more income, should strengthen the conditions for non-speculative investment, ie direct investment enterprises, and strengthen the conditions for existing businesses continue to grow.

Calculating GDP

There are three theoretical methods of calculating GDP equivalent: (1) Method of Expenditure, (2) Method of Income and (3) Value Added method.

Expenditure Method

GDP is the sum of all expenditures made for the purchase of goods and services produced within an economy, i.e. excludes purchases of intermediate goods or services and imported goods or services.

Added Value Method

GDP is the sum of the aggregate values of the various stages of production and in all sectors of the economy. The added value that adds a company in the process of production is equal to the value of production minus the value of intermediate goods.

Income Method

GDP is the sum of the incomes of employees, the company earnings and taxes less subsidies. The difference between the value of a company's production and intermediate goods is one of the following three destinations: the workers in the form of labor income in the form of corporate or state benefits in the form of indirect taxes such as VAT.

Uses of GDP

GDP each year is determined by three methods: by summing the income (compensation of employees, net taxes on production and gross margins of the economy), by summing the costs (expenses for final consumption and savings) and as an added value. Calculations are made based on data on actual transactions in the current (nominal) prices.

However, changes in GDP as dependent on changes ...