GDP as the Number One Factor that Leads to a Country’s Success

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GDP as the Number One Factor that Leads to a Country’s Success
A country’s success mainly depends on its economic growth in rich countries and Economic developments in poor ones (Maddison, 20). This essay is set to give an overview of how the GDP weighs the economic activity of a country leading to its success. The GDP is basically the measure of production aggregately which equals to the sum of values added to the gross of all institutions and residents linked in production. The GDP measures the value of the goods and services at the final stage. The Total GDP is broken down according to the contribution of each sector or industry of the economy. Notably, it is regarded as one of the most powerful factors of national success and development. Therefore, this essay seeks to explain just how important GDP is to securing a country’s future success across all other factors that gear towards securing the growth and development of a country in order to secure a successful future for its citizenry.
The national income and products account which form the basis for measuring GDP, allows economists, policymakers, and other businesses to examine the importance of irregularities such as the fiscal policy and monetary, economic shocks such as a rise in the fuel or oil price, spending plans, and tax. National accounts have led to a notable reduction in the seriousness of the cycles of business since the end of World War II. This, in turn, makes available such policies and institutions that contribute towards stabilizing not only a country’s economy but also its political and social position. In turn, a country is able to reap and enjoy success from all angles.
The historical concept of the GDP should be differentiated from the ways of estimating it due to changes historically. Firms’ added value is very easy to calculate compared to the value added by the financial industries and the public sector which are more complex. The activities of calculations of the added values are very important towards a country’s success, economic development and the governing international conventions which are with the exclusion or inclusion of the GDP. Therefore, the actual number of the GDP is a vast patchwork product involving statistics and processes that are complicated from the raw data so as to fit in the conceptual framework.
The Production approach is one of the most direct approaches which determine the GDP where it totals the output of every enterprise-class to get to the total. The expenditure approach, on the other hand, concentrates on the principle that someone must buy all the products making the total product to be equal to a person’s total expenditure while buying things. Notably, the Income approach deals with the principle that the productive factors of the incomes should be equal to the value of production. The GDP in this approach is a total of the entire producer’s income.
Notably, the GDP normally fluctuates due to the cycle of the business. When there is a boom in the economy and there is a rise in the GDP, the inflationary coercion builds up suddenly due to the productive and labor capacity getting fully utilized. As a result, the Central Bank commences a tighter monetary cycle in order to cool off the quell inflation and the economy which is overheating.
As there is a rise in the interest rates, consumers and companies cut back on their spending and as a result, there is a slowdown in the economy. With demand rising, some companies are forced to lay off their employees who affect the consumers’ confidence further. However, the Central bank loosens the monetary policy so as to encourage the growth of the economy and employment until the economy is flourishing again.
Consumer spending is one of the biggest components of the GDP, accounting for the U.S economy by two thirds. The confidence of a consumer has a very important role in the economic growth and success of a nation. A level of high confidence depicts that, consumers are more than willing to spend while there is a reflection of uncertainty on the future and unwillingness to spend where there is low confidence of the consumer. The higher the GDP the higher the growth of the economy and this is able to significantly impact on the overall performance of a country including stabilizing its political environment and thereby ensuring its success in the long run.
The business investment is also a component of the GDP. It increases the capacity of production and gives a boost to employment. The spending of government presumes the particular importance as a component of the GDP where the consumer and the invested business can at once decline spending for example after a recession. Notably, a current account surfeit raises the economy of a country through the GDP while a persistent undersupply is a trail on the GDP.
However, as much the GDP is considered a factor that leads to a country’s development, it should not be termed as a measurement of the well being of a country. One should generally know of which GDP components contribute to the economic growth for the same number of GDP does not necessarily depict situations th...