Partha's Econ Blog

1. Define & explain GDP.
=>Gross Domestic Product is the total official measure of the market value of all goods and services produced within the geographical border of a nation in a specified time period which is equal to total consumer, investment and government spending with value of imports subtracted from value of exports.
2. How exactly is this figure determined?
=>GDP is calculated by adding private consumption or consumer spending in a nation's economy, sum of government spending, sum of all the country's businesses spending on capital and the nation's total net exports (calculated by subtracting total imports from exports). In other words, GDP figure can be determined by three basic components-consumption (the amount that consumers pay for goods), investment (the amount of money spent on new production facilities), services (the amount that consumers pay for the services they use).
3. Explain how "trade deficit" (net exports) is subtracted or added to achieve a total.
=>Trade Deficit is the difference of total exports minus total imports. The higher this figure is, the more trade deficit a nation faces. For example, according to the US Census Bureau of Economic Analysis through the Department of Commerce calculated that the March 2008 exports was $148.5B while the imports was $206.7B, resulting in a goods and services deficit of $58.2B. March exports was $2.6B less and imports was $6.1B less compared to February 2008 trade deficit.