Relationship between GDP & HDI
Submitted ToCourse Instructor Of B-University of DhakaDepartment of Banking |
Submitted ByMd. Yasir ArafatId No. 62B.B.A 13th BatchDepartment of BankingUniversity of Dhaka |
Date of Submission08.o7.09 |
Introduction to GDP
A region's gross domestic product, or GDP, is one of the ways of measuring the size of its economy. The GDP of a country is defined as the total market value of all final goods and services produced within a country in a given period of time (usually a calendar year). It is also considered the sum of value added at every stage of production (the intermediate stages) of all final goods and services ...view middle of the document...
So stocks and bonds indirectly affect the GDP. Although such purchases would be called investments in normal speech, from the total-economy point of view, this is simply swapping of deeds, and not part of real production or the GDP formula.
G (Government spending) is the sum of government expenditures on final goods and services. It includes salaries of public servants, purchase of weapons for the military, and any investment expenditure by a government. It does not include any transfer payments, such as social security or unemployment benefits.
X (Exports) is gross exports. GDP captures the amount a country produces, including goods and services produced for other nations' consumption, therefore exports are added.
M (Imports) is gross imports. Imports are subtracted since imported goods will be included in the terms G, I, or C, and must be deducted to avoid counting foreign supply as domestic
Examples of GDP component variables
Examples of C, I, G, and NX(net exports): If you spend money to renovate your hotel so that occupancy rates increase, that is private investment, but if you buy shares in a consortium to do the same thing it is saving. The former is included when measuring GDP (in I), the latter is not. However, when the consortium conducted its own expenditure on renovation, that expenditure would be included in GDP.
For example, if a hotel is a private home then renovation spending would be measured as Consumption, but if a government agency is converting the hotel into an office for civil servants the renovation spending would be measured as part of public sector spending (G).
If the renovation involves the purchase of a chandelier from abroad, that spending would also be counted as an increase in imports, so that NX would fall and the total GDP is affected by the purchase. (This highlights the fact that GDP is intended to measure domestic production rather than total consumption or spending. Spending is really a convenient means of estimating production.)
Types of GDP
There are two types of GDP
* Nominal GDP
Nominal GDP is GDP evaluated at current market prices. Therefore, nominal GDP will include all of the changes in market prices that have occurred during the current year due to inflation or deflation. Inflation is defined as a rise in the overall price level, and deflation is defined as a fall in the overall price level. In order to abstract from changes in the overall price level, another measure of GDP called real GDP is often used. Real GDP is GDP evaluated at the market prices of some base year. For example, if 1990 were chosen as the base year, then real GDP for 1995 is calculated by taking the quantities of all goods and services purchased in 1995 and multiplying them by their 1990 prices.
* Real GDP
Real gross domestic product (GDP) is a macroeconomic measure of the size of an economy adjusted for price changes and inflation. It measures in constant prices the output of final goods and...