Nominal gross domestic product is the cost of production for that current year. Our
world faced a life event that many are still recovering from. During covid a lot of
people were impacted and especially a lot of businesses. However, towards the end
of 2021 CNBC reported that GDP grew at a 6.9% from the start of pandemic.
Although a lot of companies were still dealing with a lot of call outs due to covid
they still managed to move production to their expedited rates. Consumers were able
to purchase the product at a much faster rate as the work force slowly started
returning to work. I know a lot of people were concerned about how they were
going to get their daily needs, and sadly some people did struggle, but as the new
article reports, we're slowly starting to get back to normal from pre pandemic. I
don't feel like we'll ever completely go back to pre pandemic, but we're starting to
see the shelves stocked again with every day items. In the Oxford Languages
dictionary, the definition of gross domestic product (GDP) is the total value of
goods produced and services provided in a country for one year. I think it is a sort
of benchmark or point of reference where a certain economy stands or shows how it
grows or shrinks. This sums up consumption, investments, government purchases, and
net exports to measure the whole economy in specific periods of time to compare if
the economy is healthy or not.
There is an article by the associated press on how the U.S economy has shrunken
from April to June for a second straight quarter. It says the decline of gross
domestic product in consecutive quarters could be an indicator of a recession. The
article explains how the report on GDP comes in a critical time as consumers and
businesses have been struggling under the pressure of inflation and high interest
rates. The government has been trying to “fight” inflation by raising interest rates,
but it is affecting small businesses and consumers alike. Government avoids
recession talk and steer towards fighting inflation. Nominal gross domestic product is
a culmination of final goods used in consumer consumption, economic investment in
business, government purchases, and net exports. These categories summarize the
final goods produced in a country, excluding any intermediate goods, as to not count
these goods twice. Nominal gross domestic product sums up consumption,
investments, government purchases, and net exports for a specified time. This is
valued at current-year prices. The nominal GDP measures the current dollar value of
production. This includes consumptions, investments, government purchases, net
exports. Due to inflation this may not reflect true economic growth or fall. It is
important to determine the real GDP by using a base-year to calculate with a
constant price. This will allow us to determine whether there has been economic
growth and at what percentage of growth has transpired. This will also allow for us
to determine whether there has been a price inflation or deflation over the specified
time.
h h h h h h h h According to the Bureau of Economic Analysis, “Real gross domestic
product (GDP) increased at an annual rate of 6.9 percent in the fourth quarter of
2021 (table 1), according to the "advance" estimate released by the Bureau of
Economic Analysis. In the third quarter, real GDP increased 2.3 percent (2022). The
economic growth is due to an increase in private inventory investments led by retail
and wholesale trade industries, an increase in exports of service led by travel and
healthcare, a decrease in federal spending on intermediate goods and a decrease in
consumption expenditures, and an increase in imports primarily reflected an increase
in goods. Current-dollar personal income increased due to compensation increases
accompanied with rental income being offset due to government or social benefits
(U.S. Department of Commerce, 2022). Nominal GDP is the Gross Domestic Product
in current time with current prices. Unlike Real GDP that uses the previous years as
a base to calculate total market value or GDP, nominal gross domestic product
calculates the total market value of the goods and services produced in a county's
economy over a certain amount of time. When calculating GDP, it uses current
prices in its equation. Nominal GDP does not include things like air and land
pollution or inflation.
GDP= C+I+G+NX
According to bea.gov the United States nominal GDP is fluctuating over the last
few quarters. They have had an upturn in exports which resulted in a lower
decrease in the second quarter and a smaller decrease in federal spending. GDP is
an overview of how well an economy is performing.
GDP does not include all production and consumption.
GDP does not include intermediate goods, underground economy activities - legal
and illegal - and social/environmental well-being in its calculation.
GDP is the value of all new final goods and services produced within a country’s
borders by its own citizens or foreign citizens in a given time period.
The formula for GDP is:
Y=Consumption(C)+Investment(I)+Government Expenditures(G)+Net Exports(X-M).
Consumption (durable and non-durable goods and services for individual household
consumption)
Investment (Consumption of new physical capital and new housing such as factories,
machines, tools, transportation systems, new houses, etc.) Investment is purchased using
financial capital instruments.
Government expenditures (all Federal, State, and Local government purchases from
paper clips to aircraft carriers).
Net Exports (Trade Balance=Exports-Imports)
GDP is meant to measure economic well-being, but may indicate a growing, healthy
economy when the environment is damaged due to the production and consumption
process.
What is an example of a legal informal economic activity that is not counted in
GDP?
What is an example of an illegal informal economic activity that is not counted in
GDP?
In my view, I would consider nominal GDP as the gross domestic product that
relates to the evaluation of the current market prices. As it is known, the Gross
domestic product is purely the value of all the goods and services a country
produces. However, it is worth noting that the real GDP is different from the
nominal GDP as the nominal in that the nominal GDP includes a shift in prices as
determined by the level of inflation. The current prices play a significant role in
understanding the nominal GDP for any given country. It is therefore important to
understand that nominal GDP does not do away with inflation. It considers the pace
at which the prices are rising at the current times in the country. The article by the
CNBC news outlet explains first the understanding of GDP. At the end of the
article, it gives an understanding of how the GDP affects the growth as well as the
investors. It explains that with a bad economy, there are probably lower profits for
companies. The stock prices will likely hit a snag and some lower points with such
GDP (Mark, 2013). Investors will always research and compare the GDP growth to
know where to invest and the likely growth of their investment. ominal GDP it's
more like a measurement of country gross an domestic the product based on the
current price is more like a output adjusted the inflation sometime by multiplying
the current years in quality of an output by the currency market price is very
important the nominal GDP is production goods and service which will attend to
current prices,Locate an online news article that discusses impacts to GDP in some
way. Summarize the article and explain its relation, The decline makes it two
quarters in a row of negative growth, following a 1.6% drop in the first quarter,
and the news will lead to pronouncements that the U.S. has now slipped into a
recession. However, while two quarters of contraction in economic output is often
used as a measure of a recession, the official determination will not be made for
some time and will take into account a host of other economic data. nominal GDP
is describe as if a country has services and products priced according to the way
people spend and make money without the regards of inflation in the current time
period. The article that I chose is a great article for anyone to read especially a
beginner to this topic. This article defines the meaning of nominal GDP. It is
mentioned about the way to calculate Gross Domestic Product. There are two ways
of getting the calculation. You can either get it by what the people spend or what
the people earn. This section is teaching me about why in business I am doing
some of what I have to do. I never really grasped an understanding of why I have
to report certain information to the IRS quarterly pertaining to the service that we
render. This article is worth sharing with my family and friends so that they are
aware of the importance of doing business properly. My payroll company assists us
whenever it reports to the IRS our earnings every period. Below I will share the
link to the article. Nominal gross domestic product, or GDP, is an economic
measurement of money spent on goods and services during a specific time period.
In order to find the GDP you add up the price of all goods and services produced
During a month, quarter, year, or anytime that an individual is looking for in order
to create usable data.In an article by Morgan Stanley, they discussed “persistent
inflation, supply chain constraints, the continuing pandemic and war in Ukraine”
(2022 Midyear Outlook: Slowing or Stopping? | Morgan Stanley, 2022), and how it
relates to global GDP and how we are not “in a worldwide recession” (Morgan
Stanley, 2022). They go on to say that the Morgan Stanley chief global economist
and his team believes that the global economy will avoid a true recession this year
basing much of that on a post COVID-19 rebound by businesses. They name the
biggest risks for the global economy are embargoes of imports of oil from Russia
and COVID-19 lockdowns in China.
References
h h h h h h h h U.S. Department of Commerce. (2022). Bureau of Economic Analysis.
https://www.bea.gov/news/2022/gross-domestic-product-fourth-quarter-and-year-2021-
advance-estimate
