Sloman (2006) has explained that demand is limitless and is related to wants. Moreover, if goods and services were free, people would simply demand whatever they wanted. Supply on the other hand has limits. It is related to the resources available to the firms (Sloman, 2006, p.5). Growth, inflation, unemployment, GDP etc are some of the areas in which microeconomics is mostly interested in. This paper mainly focus on Gross Domestic Product (GDP) and its effects on a country’s economic growth and personal wellbeing.
Mankiw & Taylor (2006) have mentioned that GDP is a measure of total income of a nation (Mankiw & Taylor 2006, p.464).They also pointed out that GDP is the total market value of all final goods and services produced within a country in a given period of time (Mankiw & Taylor 2006, p.466). It is calculated based on the total consumer investment and government spending, plus the value of exports, minus the value of imports (GDP, n. d). The following formula can be used to calculate the GDP of a country in given financial year.
From the above equation it is clear that when the import increases the GDP decreases whereas when the consumer spending, investment made by industries, and governmental spending increases, the GDP also increases. The current recession (Recession is a phenomenon in which the output in the economy declines or the growth becomes negative (Sloman, 2006, p.6)), has forced people to think twice before lavishly spending their moneys. Westerners who normally spend more than what they earn has already started to save some money for the future after visualizing the negative impacts of recession. But from the above formula it is evident that too much saving can drastically affect the GDP. GDP is a measure of standard of living in a country even though many economic Gurus have different opinions. The GDP performances of United State in the recent years can be