Gpd the Ultimate Measurement of Economys Wealth Essay...

GDP: The ultimate measurement of a countrys wealth? A lot of us have heard of the term GDP, especially toward the end of official year, but probably dont pay much attention to it. But to economists, businessmen, firms as well as governments, GDP is one of the most important tool used to reflect how a country do not only in economic but also in social and political perspectives. But what is GDP? What are its components? Why is it so important? And if GDP is that important and necessary, why are there still controversies against it? GDP or Gross Domestic Product is defined as the total value of final goods and services produced within a countrys border during a specific period, usually a year. The phrase produced within a†¦show more content†¦Normally, real GDP is a much better measurement then nominal GDP for the basic fact that the value of a loaf of bread is remained unchanged, but because of the fluctuation of the inflation, that makes it market price different. GDPs components consist of consumption, government spending, investment, and net export (export minus import). Consumer consumption is considered as the most important fragment of GDP, taking up about 70% of a countrys GDP. If the economy is doing well, unemployment rate and inflation are kept low, people tend to have more money to spend which can boost the economy growth by so many times. GDP is not only an important indicator to a countrys economy growth but also to social and politic perspectives. GDP reflects unemployment rate, inflation and interest rate. The Federal Reserve has continuously raised the interest rate at .25 point for more than 10 successive times in other to attract more and more investment. Government spending, as a part of GDP, has also increased from year to year. As a year passes, economists, firms and governments look at GDP as an indicator for the following years economic policy in order to keep the economy go in a right track. GDP is also an indicator of recession, when an economy experiences two successive declines in GDP, the economy is going through recession. For the down side, even though GDP is the best measurement of a countrys