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APA
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Literature & Language
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Coursework
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English (U.S.)
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Topic:

Gross Domestic Product. Coursework. Answer the questions

Coursework Instructions:

QUESTION 1
Gross Domestic Product (GDP) is defined as the market value of all final goods and services produced within a country in a given period of time.
GDP can be measured by adding up the value of the expenditures on final goods and services. In this expenditure approach, economists divide total expenditures into 4 components: consumption (C), investment (I), government purchases (G), and net exports (NX).
Based on the above information, answer one of the following questions:
i) Investment(I) includes spending on capital equipment but NOT spending on purely financial assets like stocks, bonds, and mutual funds. The question is why not?
ii) The government purchases (G) includes salaries paid to soldiers but NOT Social Security benefits paid to the elderly. Why not?
(hint: GDP is a measure of total production of goods and service. Does financial asset like stock as goods or service? How about government transfer payment like Social Security benefits? )
QUESTION 2
Real GDP evaluates current production using prices that are fixed at the base year levels and therefore shows how the economy’s overall production of goods and services changes over time. In this regard, real GDP is a better gauge of economic well-being than is nominal GDP.
Do you think real GDP is a good indicator of the well-being of one nation? Why or why not (For the sake of space, you are supposed to take your stand on only one side)?
It is important to state your opinion clearly and defend your argument with necessary reasoning and/or concrete example.
The answer of each question should be around 200 words.

Coursework Sample Content Preview:

Gross Domestic Product
Name
Institutional Affiliation
Gross Domestic Product
Question 1 (ii)
Gross Domestic Product (GDP) represents the total market value of all the commodities (goods and services) produced in a specific country within a particular period. While calculating GDP, investments (I), government purchases (G), Consumption (C), and Net Exports (NX) are considered. While salaries paid to the soldiers are included in the government purchases, social security benefits paid to the elderly citizens are not included due to various reasons. Government purchases refer to the spending on goods and services by the state. Social security together with welfare programs, unemployment insurance, and Medicare are categorized as transfer payments. They include money transferred from a party to another. Since they do not represent payment for goods or services, they are not used in the calculation of GDP. Rather, they are used for budgeting purposes in the government current expenditures as well as the total government expenditures.
Social security benefits are made as a one-way payment, and no goods or services are received in return. They are therefore not used in the calculation of GDP. However, when the final recipient of the social security (transfer payment) buys goods and services, the personal consumption is included in GDP. This shows that were social security benefits to be included in the calculation of GDP, double-counting would arise. These payments are also not a reflection of the production of the economy and do not represent the current income. They are therefore excluded during the calculation of GDP. Finally, social security benefits are not i...
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