GDP - Gross Domestic Product Essay Example | Topics and Well Written Essays - 1500 words

GDP - Gross Domestic Product - Essay Example Nominal GDP is the GDP according to current year prices while real GDP accounts for the effect of inflation on prices and is therefore also known as inflation adjusted GDP. By the use of a base year and elimination of effects due to price changes, real GDP allows useful comparisons to be made regarding the production of goods and services in an economy. For instance if the economy were growing at the rate of 4% per year while the rate of inflation was 1% then only 3% of the growth would be due to an increase in the economic output while 1% would be only due to price changes. GDP per capita describes the average number of goods and services consumed per person in a country. The significance of GDP as an instrument for channeling of aid and investments into countries is highlighted by Canoy and Lerais in the research titled ‘Beyond GDP’ that was composed for the European Commission in which they say: ‘GDP is the best-recognized measure of economic performance in the world, often used as a generic indicator of well-being. GDP is used in a large variety of political and financial arenas. It serves as a criterion to decide who has access to funds at international organizations such as the EU, UN, IMF and World Bank, GDP plays an important part in the Stability and Growth Pact, and it is a lead indicator for forecasts of financial markets and banks, to mention just a few examples. It is also used for international comparison and rankings and plays a crucial role in political debates.’ (Canoy and Lerais, 2007) The GDP of any given country fails to adequately explain its overall economic well being since its calculation either excludes or overstates a number of crucial aspects that describe the standard of living of a population. The notion of ‘well being’ has been described as a multidimensional concept ‘with both an individual interpretation in the Aristotelian spirit and a collective one to capture the progress of a nation’ (Canoy and Lerais, 2007).   Although GDP per capita i.e. goods and services consumed by the average person measures the spending by an individual yet it does not accurately depict an individuals’ well being. Materialistic expenditure is not all that characterizes individual well being. Rather it is a much more comprehensive idea including psychological well being as well as happiness derived from non material sources. An individual’s health, diet, achievements, mobility and participation in society are all essential sources o f contentment that are not included in calculation of GDP.

Why are the events surrounding the South Sea Company often described Essay

Why are the events surrounding the South Sea Company often described as a financial bubble Identify at least one other famous bubble and discuss what feat - Essay Example With desires to get rich quickly, ambitious investors hurriedly and haphazardly invested on stocks of a particular company without first assessing its real situation. The result is the vital drop not only of a single firm but also of the entire national economy. This is the predicament that the South Sea Company in England in the 18th century experienced. Considered as one of the worst financial disasters in a capitalistic society, the South Sea Bubble is a proof that avarice can lead a single person, firm or even an entire nation’s economy to collapse. In those days, the British Empire reigned over the entire world. It was a time of affluence and prosperity for British people enabling them to invest. The exuberance of investors to gain more out of the company’s monopoly of the South Seas compelled the company issued more stocks that were also sold out by greedy investors. The lavish and generously enamored company office ostentatiously displayed the opulence and success of Britain on its industrial revolution. With the notion spread by speculators that this company â€Å"could never fail,† its share price skyrocketed tenfold from its original value, making its investors rich overnight. It was at this point that the reality set in, bursting the bubble of the company’s overpriced share prices. South Sea Company’s heyday ended when its management realised that they failed to manage and operate the company properly. They realized that the company was not generating profit at all. The funds came basically from selling stocks and not from actual commerce. News that the company was actually profitless instigated panic stocks selling. Useless stocks were sold frantically leading to a stock market crash. Many British people lost their fortune because of this. From 950 pounds per 100 pound par value it slid down to 290 pounds in less than 4 months. The invention of the personal computer