3. gdp copy

MACROECONOMICSVictoria International College - Course Content - Confidential*BY PROF VALLIAPPAN RAJULecture 3GROSS DOMESTIC PRODUCT

Victoria International College - Course Content - Confidential

*WHAT YOU WILL LEARN

What is called as GDP?What are the components of GDP?Formula to calculate GDP.

Victoria International College - Course Content - ConfidentialINTRODUCTION


*Victoria International College - Course Content - ConfidentialGDP of Malaysia is 313.2 billion USD (2013)


*Victoria International College - Course Content - ConfidentialMalaysia stands in 35th Rank in World on GDP ranking. Following are 34 countries which is ahead of Malaysia in terms of GDP,

United States, China, Japan, Germany, United Kingdom, France, Brazil, Italy, India, Russia, Canada, Australia, South Korea, Spain, Mexico, Indonesia, Netherlands, Turkey, Saudi Arabia, Switzerland, Nigeria, Sweden, Poland, Argentina, Belgium, Taiwan, Norway, Austria, Iran, United Arab Emirates, Colombia, Thailand, South Africa and Denmark.

(Source: International Monetary Fund, 2015 Report)


*Victoria International College - Course Content - ConfidentialWhat it Gross Domestic Product?How is it relevant to judge at Economy (nation)?Why is it important?

What is GDP...


*Victoria International College - Course Content - ConfidentialThe gross domestic product (GDP) is one of the primary indicators used to gauge the health of a country's economy. It represents the total MONEY value of all goods and services produced over a specific time period; you can think of it as the size of the economy.


GDP is equal to the sum of the income generated by production in the country in the periodthat is, compensation of employees, taxes on production and imports less subsidies, and gross operating surplus (or profits).*

JB College - Course Content - Confidential

*Victoria International College - Course Content - ConfidentialWhich Countries are more Productive in terms of GDP?If you are measuring productivity based on Gross Domestic Product (GDP), the ten most productive countries in the world are, in order, the United States, China, Japan, Germany, France, the United Kingdom, Brazil, Italy, Russia and India. Each of these countries has a GDP of two trillion U.S. dollars or more (Source: World Bank Report, 2014)

The countries whose GDPs have the highest rate of growth, also in order, are Turkmenistan, Chad, Mongolia, the Democratic Republic of Congo and the Ivory Coast.

A country's GDP is essentially a measure of the health and size of its economy. It is calculated by estimating the dollar value of all goods produced within a country during a certain time period, most commonly a year. Countries with healthy economies tend to produce more goods and have higher GDPs, and could therefore be said to be the most productive.


*Victoria International College - Course Content - ConfidentialMalaysia - 313.2 billion USD (2013)USA - 16.77 trillion USD (2013)Singapore - 297.9 billion USD (2013)China - 9.24 trillion USD (2013)India - 1.877 trillion USD (2013)UK - 2.678 trillion USD (2013)Thailand - 387.3 billion USD (2013)Philippines - 272.1 billion USD (2013)Tanzania - 33.23 billion USD (2013)Kenya - 55.24 billion USD (2013)South Africa - 350.6 billion USD (2013)UAE (Dubai) - 402.3 billion USD (2013)Know about GDP of few nations:


*Victoria International College - Course Content - ConfidentialLets calculate GDP


GDP = C + I + G+(X-M) ORGDP = consumption + gross investment + government spending + (exports imports)*


*


Where :C : Consumption I : Investment G : Government spendingX : Exports M : Imports*GDP = C + I + G+(X-M)


C : consumption

Includes ::Personal expenditures mainly consists of: food householdsmedical expenses rent, etc.

For example, if a hotel is a private home then renovation spending would be measured as Consumption.*


I : investments by business or households in capital.

Example, If you spend money to renovate your hotel so that occupancy rates increase, that is private investment.

Includes:Construction of a new mine.Purchase of machinery or equipment for factory.Purchase of software.Expenditure on new houses. Buying goods and services.

NOTE:: Investments on financial products is not included in Investments.*


G : Total government expenditures on final goods and services.

Includes ::Investment expenditure by the government.Purchase of weapons for the militarySalaries of public servants.

Example: 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).*


X : Gross Exports.

Includes :: all goods and services produced for overseas consumption.

Example, If a domestic producer is paid to make the chandelier for a foreign hotel, the payment would be counted in gross export.

*


M : gross imports.

Includes :: any goods or services imported for consumption

Example, If the renovation of hotel involves the purchase of a chandelier from abroad, that spending would be counted in gross imports.*


*Victoria International College - Course Content - ConfidentialWHAT WE LEARNT IN THIS SESSION,

Micro-Economics Study of Economy at the level of individual

Economics Study of Markets and how resources are allocated

SUMMARY


*Victoria International College - Course Content - ConfidentialACTIVITY1. Calculate GDP using the following data:

Consumer spending = $200 millionInvestment spending = $55 millionState and local government spending = $120 millionFederal government spending = $80 millionImports = $50 millionExports = $45 millionIncome taxes = $100 million

2. Write short note: Why is it important to know GDP of a country?

3. Answer on your own: Your opinion about Malaysian Economy. Is it progressing or balancing or dipping? Justify your answer.


*Victoria International College - Course Content - ConfidentialIn this case, $200 million + 55 million + $120 million + $80 million + $45 million = $500 million. Then imports of $50 million is subtracted to get GDP = $450 million.Answer


**

3. gdp copy

Documents