GDP And Real Gross Domestic Product: Nominal GDP

Gross Domestic Product (Nominal GDP) measures the wealth of a country or state by totaling the values of goods and services produced in an economy in a given year (Callen, T. (2012, March 28). Finance & Development). The economic measurement gross domestic product is determined by adding the following—household consumer spending (C), investment spending by firms (I), government spending (G), and Export minus imports (X-Im) (Besanko, D., & Braeutigam, R. R. (2008). Microeconomics). On the other hand, real gross domestic product (real gdp) is the value of all final goods and services at constant prices. Real gross domestic product selects a base year with a certain price that does not change overtime. Refer to my graph titled nominal gdp vs.

GDP per capita is obtained by dividing gross domestic product by the size of the population (Gross Domestic Product Per Capita. (n.d.)). For example, in the excel worksheet labeled GDP per capita I calculated the GDP per capita for the countries Kuwait and Australia. Kuwait is a country is a country located in the Middle East which is a bit smaller than the size of New Jersey. On the other hand, Australia is a country larger than Kuwait and almost the size of the United States. In order to determine the GDP per capita for Australia I divided GDP by the population size in millions to get a value of 4 for GDP per capita. When using GDP per capita to calculate a countries well-being there are advantages and disadvantages. The advantages of GDP per capita is that it’s a good indicator of a countries economic growth and standard level of living compared too other countries (Gross Domestic Product Per Capita. (n.d.)). However, the limitations that come with GDP per capita is it does not take into account the homeless or immigrants when during calculation (Callen, T. (2012, March 28). Finance & Development). Additionally, when measuring a countries well-being lacks to account for changes in the environment and social costs. Overall, GDP per capita gives a better picture of human well-being compared to GDP but does not account for certain