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Gross Domestic Product (GDP) refers to the market value of all final goods and services produced in a country within a specified period of time usually one year. GDP is used by economists to measure the performance of a country's economy. Final goods refer to the goods which are bought by a consumer for consumption and not for use in production of other goods…
Wessels however points out that this does not necessarily mean that the citizens of the US have better living standard than their counterparts in the UK. (21). GDP therefore cannot be used as the sole factor in measuring the living standards of the citizens of a country. However chances are that a country with a high GDP has a better standard of living than that with a low GDP.
So what encompasses GDP' Well there are a number of components which when added together make up the GDP of a country. According to Sowell, they include Consumption which is denoted by letter C, Investment which is denoted by letter I, spending by government and finally exports and imports denoted by letter X and M respectively. Consumption refers to all the money spent by citizens of a country in buying goods and services which they expect will satisfy their needs. This includes money spent on food, purchase of new clothes as well as entertainment. (50-51)
Sowell further notes that spending by the government is another component of the GDP. For example the UK government spends money to buy new military equipment and also pay its workers. (70).This expenditure is also part of the country's GDP. Investments into an economy are also used in calculation of the Gross Domestic Product. ...
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