When comparing the wealth or living standards of a country with those of another country over a given period, economists normally utilize the Gross Domestic Product (GDP). GDP is a tool used to evaluate the value of goods and services produced in a given country. Economists have used the GDP for decades as a useful framework for making crucial decisions affecting people’s living standards.
The Bureau of Economic Analysis is charged with the responsibility of measuring the GDP of the United States. Besides, both the International Monetary Fund (IMF) and the World Bank also measures the GDP of the United States and those of other countries as well. Such global financial institutions would be interested in measuring the GDP of a country because they can compare it with that of other nations. It is also useful when making crucial financial decisions affecting the country. Other nations would also be interested in the GDP of the United States for purposes of comparing it with their GDPs. The GDP of the United States represents the goods and services produced by the country over a given period. GDP weighs the spending of businesses, governments and households in a given year against the previous year spending. The GDP of the United States is a closely monitored and comprehensive statistic because it is used by both Congress and the White House while preparing the federal budget. Besides, the GDP of the United States is also useful to the Federal Reserve in formulating various monetary policies.
GDP also acts as a measure of a country’s economic activities. Different types of businesses in the US utilize the country’s GDP while preparing their economic performance forecasts. They also use it in making investment and production decisions, and in employment planning. The GDP of a country is an intersection of three sides of its economy namely output, expenditure, and income. In this case, the US GDP acts as an index of the country’s well being for temporal and international comparisons.
The GDP of the United States represents the country’s economic growth and production and as such, it has a huge effect on various aspects of the country’s economy. For instance, a healthy economy results in increased wages due to increased labor demand by businesses intent on meeting the needs of a growing economy. This helps to reduce unemployment. A significant change in the GDP of the United States would affect the country’s stock market. This is because if the economy is not doing well, companies operating in such an economy are likely to report reduced profits, and hence the reduced stock prices. International trade contributes significantly to the US’ GDP. For example, in the past decade, export as a share of US GDP has increased to 13.0% by 2008, compared with 10.9% in 1998. Besides, the manufacturing industry created over 2.58 million jobs during this period.
In a bid to deal with such microeconomic issues as unemployment, inflation, and income that are responsible for major economic shocks like the Great Depression, the US government has endeavored to incorporate policy changes to the US economy to stabilize the country’s economy. This would enable the US economy to grow and stabilize in the international market. This kind of economic management calls for the development of the necessary monetary and fiscal policies.
The US government is committed to ensuring the prudential allocation of limited resources to various projects. This is important when a country is conducting a microanalysis of the international market to determine where it could or have failed. These decisions are important because they impact on the demand and supply of services and goods in the international market. Consequently, the decision could end up affecting the prices of such goods and services and the quantities demanded or supplied on the same.