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College: Lecturer: Course: Date: Gross Domestic Product Outline of contents Content Pages Abstract 3 Introduction 3 Taiwan GDP 3 US GDP 4 Applicability of GDP 5 Conclusion 6 Works Cited 7 Copies of the articles 8 Abstract The GDP plays a central role in the determination of a countrys current prosperity. It can also be used to forecast financial conditions within the country. And when all relevant conditions have been standardized, it can also be used in comparing performances between two countries. Introduction Gross Domestic Product (GDP) is the total value of all goods and services produced within the geographic boundaries of a country in a particular year, added to the value of exports, and minus the value of imports (Investor, N.
D. ). The figure finally depicted includes all product produced within the country, regardless of the nationality of the producers. For example, if a foreigner moves to the USA and produces a certain amount of products in a year, that will be counted as part of Usa's GDP. However, if a US citizen currently residing in a foreign country engages in lucrative business, the proceeds from such can not be included in the Usa's GDP. These distinctions distinguish GDP from GNP.
This paper seeks to discuss four case instances where the GDP has been alluded to in major business papers over the last one year. Taiwan's GDP On February 18 th, 2009, the Financial Times reported that Taiwan's GDP had reduced by 8. 36 during the year 2008. The data was got from the analysis of the last quarter of 2008, where it was discovered that for two consecutive quarters, the national GDP had reduced. Cast in the international context, this was a clear indication that the global economic recession had finally infiltrated into Taiwan's markets, and was beginning to wreck havoc there. Because of the forecast financial difficulties, a tax reduction policy was put in place, to try and maintain a loose money policy (Robin, 2009). Since GDP relies heavily on exports, the reduction in Taiwan's GDP by such a significant percentage means that any trading partners are likely to be affected too.
And indeed, due to the slump, the wider Asia area, to which Taiwan exports most of its manufactured goods, was affected, as many individuals faced a very real, and inevitable, possibility of losing out on their jobs (Robin, 2009). Many livelihoods, even presently, are still adjusting to this slump, hoping that Taiwan's economic decline wont last for much longer. US GDP In the US, a similar scenario unfolded for the last quarter of 2008. The GDP was calculated to have declined at an annualized rate of 6. 2 % during that time period. This was the biggest economic decline ever recorded since the 1982 recession.
The second-nearest decline to that in the post-war period is 3. 8 - vastly lower figure. Evidence for this steep decline is everywhere. In the last quarter of 2008, all major sectors of the economy shrunk. The only thing that did not shrink is government spending. Consequently, the decline in that last quarter far exceeded even the wildest estimations given by financial analysts. The highest annualized decline expected had been 5. 4 %. 6. 2 % hence was a shock to everybody hence, especially considering that the previous quarter had had a decline of only 0. 5 % in the GDP (Catherine, 2009).
The US GDP for the last quarter of 2008 was a direct reference to the drastically reduced exports during the year. During the last quarter alone, US exports reduced by an annualized rate of almost 24 %. The average citizen in America felt the effects of this reduction in exports, as major exporting firms like software companies reduced their production levels, and even laid off thousands of employees. With the present trends, optimistic declarations from the Obama administration will have to be backed by serious, tangible initiatives to turn the economy around. While trying to find the exact root cause of the recession, the US Bureau of Economic Analysis had gathered data in 2008 on the GDP figures of several consecutive quarters. The data, at least by mid- 2008, was inconclusive, since no two consecutive quarters showed a persistent decline in GDP.
However, a surprising decline of 0. 2 % was noted for the last three months of 2007, quite contrary to the widely-held estimations of a 0. 6 % increase. When dealing with economic recessions, the annualized figures from quarterly GDP reports are one of five main factors considered by the US. The others are employment statistics, industrial production, personal income and retail / wholesale sales (Sudeep, 2008). Applicability of GDP The attempt to pinpoint the cause of the recession using GDP shows its wide applicability and importance to a country. In 2001 for example, GDP and employment rates within the US were used to indicate the beginnings of an economic recession (Sudeep, 2008). For a country whereby the dynamics of international trade and the sheer amount of internal business transactions makes it hard to calculate overall business progress, GDP is an effective way of getting a feel of the general business trends.
The advantage with GDP is that through constant accounting, it is possible to compare the financial performance of a certain time frame with that of another. Constant accounting in this sense refers to the practice of accounting for GDP using a fixed dollar value, hence offsetting the effects of short term value fluctuation in the currency. GDP is a very informative financial indicator, if all other attendant factors are also taken into account. For example, while determining the vibrancy of an economy, GDP for an entire country may give misleading figures about the countrys prosperity. The population within the country also needs to be accounted for. If two countries with similar national GDP figures have different population sizes, then their levels of prosperity are different.
As a case citation, the annualized national GDP for the first quarter of 2008 showed a growth rate of 2. 9 % in America. In Japan, the national GDP for the same time period showed a growth rate of 2. 1 % (Economist, 2008). A casual glance at these figures would lead to the conclusion that the US performed better during that time period. However, when the national GDP figures are divided by the population within the two countries, Japan is seen to perform better at 2. 1 % growth rate as compared to Americas 1. 9 % (Economist, 2008).
The GDP figures per person within the country take account of demography, and are hence a more informative indicator of a countrys performance. GDP per person acts as a rough indicator of the average living conditions within the country. From this, it can correctly be inferred that the average living conditions within Japan, at least for the time period during which the GDP per person was high, were better than those of the US. Conclusion From the foregoing, its clear that the role of the GDP within a country can not be overstated. Careful analysis and counter analysis is important to ensure that the figures projected are accurate. For example, in the case of Taiwan, the GDP values depict impending doom.
The country needs to take drastic measures if all trading partners are to be maintained. In the US, a similar scenario underlies all the financial woes being observed. But at least the US is less dependent on exports, and can get more realistic figures about overall prosperity from a combination of GDP and other factors. But overall, the central role of GDP in the financial accounting of countries is an undeniable fact. Works cited Catherine Rampbell (2009) GDP revision suggests a long, steep downfall New York Times, 27 th February 2009 Retrieved 13 th April 2009 from < web > Investor Words (N. D. ).
GDP Definition 13 th April 2009 < web > Robin Kwong (2009) Taiwan GDP slumps 8 % as export demand falls The Financial Times, 18 th February 2009 Retrieved 13 th April 2009 from < web > Sudeep Reddy (2008) The GDP Debate: Did a Recession Start in 2007? The Wall Street Journal, 31 st July, 2008 Retrieved 13 th April 2009 from < web > The economist (2008) Grossly distorted picture The Economist 13 th March 2008 Retrieved 13 th April 2009 from < web > Copies of the articles: Catherine Rampbell (2009) GDP revision suggests a long, steep downfall (New York Times) The economy contracted at a far faster rate than initially estimated in the final months of 2008, the government reported Friday, suggesting a deeper recession that will further challenge the health of the financial system. Financial stocks led the market down on economic worries in general and concerns about nationalization, after the government announced that it was vastly increasing its stake in Citigroup. In the fourth quarter, the gross domestic product fell at an annualized rate of 6. 2 percent, the steepest decline since the 1982 recession and sharper than the 3. 8 percent reported earlier. Every major component of the economy shrank, except government spending.
Economists said all signs point to a similar drop in output in the current quarter. What a ghastly report, said John Rating, chief economist at RDQ Economics. This will almost certainly be the longest postwar recession, and now potentially the deepest one as well. The broadest measure of the countrys output of goods and services, the G. D. P. , was expected to be revised down, but economists were projecting a decline closer to 5. 4 percent to end 2008.
The plunge was quite steep from the previous quarter, when the economy shrank 0. 5 percent. Citigroup's stock fell 96 cents to $ 1. 50, an 18 -year low, as the government said its stake would grow to 36 percent, and other preferred shareholders agreed to convert their holdings to common stock as well. Bank of America fell $ 1. 37 to $ 3. 95. The Dow Jones industrial average slipped 1. 66 percent to close at 7, 062. 93, while the Standard & Poors 500 -stock index fell 2. 36 percent to 735. 09.
Insurance companies plunged as credit ratings agencies downgraded many of them, and General Electrics stock slumped 6. 5 percent to $ 8. 51 after it said it would slash its dividend to preserve its triple-A credit rating. Even before Fridays revision of the year-end numbers, economists had criticized government estimates as not fully reflecting the severity of the downturn. When the Obama administration released its budget plan Thursday, it used economic conditions and revenue projections that critics called optimistic, including an estimate that the economy would shrink by just 1. 2 percent for 2009. Its getting to be less and less likely...
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Research essay sample on Gross Domestic Product Economic Recession
