GDP

[jd1023]

Pretty simple question but can someone give me an in depth response about how GDP positively (and negatively) impacts the economy. Struggling with the concept a bit, just trying to consolidate an answer before the exam. Cheers

[M_BONG]

Pretty simple question but can someone give me an in depth response about how GDP positively (and negatively) impacts the economy. Struggling with the concept a bit, just trying to consolidate an answer before the exam. Cheers

OK let me give it to you from an Economics point of view (I am an Eco student, never done BM) but the positive/negatives should be the same.

GDP measures the total volume of goods and services we produce. So really it measures how much stuff we produce, it's a raw figure. Pretty useless at first because it doesn't take into account, for instance a) population growth b) inflation [general rise in prices] etc.

What's more useful is GDP growth per year - so how much it grows relative to the chosen base year.

Why is GDP growth positive/negative for the economy?

POSITIVES
1. Employment!!! If GDP is  increasing really quickly, naturally businesses need more labour to assist with production
2. Living standards!!! If GDP is really high, our economy produces more things. This means more income for all, increasing our standard of living.
3. International competitiveness: If GDP growth is really high - firms naturally invest more into improving efficiency. This means the price of our goods and services may become more competitive. You know why things made in China is so cheap? It's because they have a large GDP due to demand from overseas. More GDP growth = more production = cheaper prices = more competitiveness.

There are so many more positives.

NEGATIVES
1. GDP growth can accelerate inflation. When we are in a 'boom' phase (opposite to recession) GDP may spiral out of control. This means there is far more demand than supply. Prices go up, to prevent market shortages. Causing prices to go up, purchasing power go down.
2. As inflation rises, equity in income distribution goes down. So because those who are the lowest incomes are affected the most by inflation, the lowest income earners are most affected, decreasing fairness (equity).

There are loads more - probably too much detail for a BM question

[jd1023]

OK let me give it to you from an Economics point of view (I am an Eco student, never done BM) but the positive/negatives should be the same.

GDP measures the total volume of goods and services we produce. So really it measures how much stuff we produce, it's a raw figure. Pretty useless at first because it doesn't take into account, for instance a) population growth b) inflation [general rise in prices] etc.

What's more useful is GDP growth per year - so how much it grows relative to the chosen base year.

Why is GDP growth positive/negative for the economy?

POSITIVES
1. Employment!!! If GDP is  increasing really quickly, naturally businesses need more labour to assist with production
2. Living standards!!! If GDP is really high, our economy produces more things. This means more income for all, increasing our standard of living.
3. International competitiveness: If GDP growth is really high - firms naturally invest more into improving efficiency. This means the price of our goods and services may become more competitive. You know why things made in China is so cheap? It's because they have a large GDP due to demand from overseas. More GDP growth = more production = cheaper prices = more competitiveness.

There are so many more positives.

NEGATIVES
1. GDP growth can accelerate inflation. When we are in a 'boom' phase (opposite to recession) GDP may spiral out of control. This means there is far more demand than supply. Prices go up, to prevent market shortages. Causing prices to go up, purchasing power go down.
2. As inflation rises, equity in income distribution goes down. So because those who are the lowest incomes are affected the most by inflation, the lowest income earners are most affected, decreasing fairness (equity).

There are loads more - probably too much detail for a BM question

thanks zezima, that cleared it up I think I get it now!

[andrewmen]

Pretty simple question but can someone give me an in depth response about how GDP positively (and negatively) impacts the economy. Struggling with the concept a bit, just trying to consolidate an answer before the exam. Cheers

jd1023, dont ever feel shy about your doubts, zozo will guide you

[jd1023]

jd1023, dont ever feel shy about your doubts, zozo will guide you

andrewmen none of that, raccoon's are calling

[mc1234]

jd1023, dont ever feel shy about your doubts, zozo will guide you

you are nothing but a bully