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. ...
To get the accurate value of GDP economist add the value of all goods produced in a country and then subtract the value of all goods which are imported. The total components of GDP is expressed mathematically as Y=C+I+G+(X-M). (Sowell 80-81)
Wessels notes that measuring GDP is critical if economists are to determine the rate of growth of an economy. "In measuring GDP economists use two major methods, the expenditure method and the income approach". (qtd.in Wessels 71). The expenditure approach involves adding the total amount of money spent on final goods. In this case, GDP equals C+I+G+ (NX) where NX represents gross exports. The income approach involves adding all the income received by citizens of a country either through compensation, income from rental property, and profits of corporate organizations.
Mathematically this can be expressed as GDP= Employee Compensation+Rental Income+Corporate Profits+Net Interest+Proprietor profits.
UK GDP Figure for the year 2009
The GDP of the UK is estimated to be worth '315.5billion.
What does this mean'
The figure indicated above means that the total value of all goods produced in the UK in the 2008 to 2009 financial year amounts to '315.5 billion. This makes it the sixth largest economy in the world and third largest in Europe.
How well did the GDP grow in 2009'
In measuring the GDP of an economy, economists divide a given year into quarters. The growth of the economy in each quarter is measured and then a comparison is made with the previous quarter so as to note the difference which constitutes actual growth.(Wessels 55). For instance in the UK economy, GDP fell by 0.4% in the third quarter of 2009. In the second quarter of the same year GDP declined by a value of 0.6%.