by Jesse Vorton

Created on: July 10, 2010

Through improved technological processes for accomplishing job related tasks, a nation’s production of many of their needed services and goods have been growing exponentially, albeit at a lower cost. There are three sections in particular that will be discussed below which determine a countries economic growth.

The Business Cycle

A business cycle can be defined as the pattern of short-term fluctuations i.e. ups and downs, (expansion/contractions) within a nation’s economy. There are four phases of this cycle: peak, recession, trough, and recovery. These periods of expansion can last up to several years.

Aggregate output and the Standard of living

Aggregate output, is the total quantity of goods and services produced by a nations economy during a specified amount of time. A nation’s standard of living is the total quantity and quality of goods/services, which a nation’s population can buy with their nation’s currency. An increase in aggregate output is simply just an increase in a countries economic growth. When output grows faster than the nation’s population, two things will follow: Output per capita, which is the quantity of goods/services per person, will go up, and the system provides much more of those goods/services demanded. When this occurs, the nation’s populace will reap the rewards of having an increased standard of living.

Gross Domestic Product

GDP can be defined as the value of all goods/services provided within a given period within a nation, through domestically acquired factors of production i.e. entrepreneurship, information technology, labor, capital, and land. On the other hand, there is GNP (Gross national product), which is the total value of all goods/services provided by a countries economy within a specified period, regardless of where the factors or production are situated. There are four strategies most commonly employed to measure a nations growth, these are: Real growth rates, GDP per capita, Real GDP, and Purchasing power parity.

Real Growth Rates: This is known as the growth rate in which GDP is adjusted for inflation and changes in the value of the nation’s currency. Remember, that growth is dependent on the nations output of goods/services, increasing at a faster rate than the nations population.

GDP per capita: This simply means, the GDP per individual. This is a better measure of a countries growth than GDP. For instance if the U.S has a GDP per capita of $45,000, and the Netherlands has one of $46,000, we can infer the Netherlands person, has more disposable income than the American one.

Real GDP: This simply means that the Gross domestic product has been adjusted accordingly.

Purchasing power parity: This can be defined as the practice that exchange rates are determined so that prices of products similar across varying nations are some what the same price.

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