Economics – Assignment Example
ECONOMICS Prof GDP and what is it used for. Gross Domestic Product is one of the most important economic indicators. It measures the economic output of a country’s economy, the dollar value of all goods and service produced within a country’s markets. The larger the GDP, the large and more productive is a country’s economy. Usually GDP is calculated with the following formula: consumption plus gross investment plus government spending plus (exports minus imports). This will usually bring a good idea of the country’s economic output—however, it is important to remember that most countries have black or grey economies that are hard to measure. When GDP shrinks, that means a country’s economy is in serious trouble and a recession is looming. As the world continues to freefall in the current economic crisis, many country’s GDPs are shrinking.
2. What is NDP and again, what is it used for.
Net domestic product is related to GDP. It is a countrys GDP minus the depreciation of its capital. A number of different things, such as buildings and furniture, depreciate (or lose value each year).
It could be said that NDP is more precise and meaningful form of GDP.
3. What is NI?
Net investment is another important indicator. This is the value of all fixed goods. Again it is important to take into account depreciation in order to get a better sense of where something falls in the scale, especially since people are always replacing plant.
This is a very important indicator to get a sense of what is really happening with regards to economic activity.
4. What is PI?
Private investment is the total amount invested in an economy by the private sector. This is to be distinguished from the public sector, which is run by the government.
This is a very important indicator of economic health.
5. What is DI
Direct investment refers to how much money is spent by Country A in Country B. This is a good indicator of the relationships and connections between various countries, as well as how open economies are.
It relates especially to ownership of productive assets.