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.
i i i i i i i i 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
i i i i i i i i 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
