GDP Growth Assignment Help

GDP Growth Assignment Help

Imagine you've been assigned an economics assignment on GDP (Gross Domestic Product) by your professors. Now, if you don’t have complete clarity on the topic, it’ll obviously be difficult for you to prepare for the task.

Also, when you're pursuing economics, you're expected to have a solid grasp of important topics like GDP. However, if you have doubts about the topic or you’re just looking for a simple explanation of the concept, then you’ll find this post useful. Let’s dive deeper into this concept.  

What is the GDP growth rate?

The growth rate is the rate at which a country's Gross Domestic Product (GDP) changes/grows every year. GDP indicates the market value of the services and products produced in a country within a specific timeframe.

The real economic growth rate considers the impact of inflation in a country. Since inflation assumes a major role in the GDP of an economy, it’s crucial to determine the impact of inflation on GDP. This is why the real economic growth rate considers the buying power of consumers and is inflation-adjusted. This is the reason it’s said to be a better measure of growth rate than the nominal growth rate.

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What is the GDP trend?

Learning about trend growth is crucial for multiple reasons. Present trend growth assists in deciphering how the gap between actual and trend GDP is over time. This, in turn, presents implications for the outlook of economic growth and inflation. Long-run trend growth is even more crucial to decipher, as it’s the rate at which the economy will expand in the long run.

To understand the GDP trend, you can start with a simple measure of trend growth that depends on real GDP data only. You can eliminate all short-term and medium-term fluctuations, which include business cycles, and keep the long-term changes only.

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What is an economic trend?

An economy consists of all of the financial transactions between organizations and consumers in a country. Generally, when an economy is talked about, it’s always related to a specific country.

Now, economic trends are basically patterns. In most contexts, trends usually emerge from sets of data, and then they are interpreted. For instance, if someone plotted the stock market price at three o'clock every day for four weeks, the dots would form a pattern or a trend, and there would be eighteen dots on the chart.

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Real GDP growth rate formula

Calculating real GDP is a complicated process. In general, the real GDP is calculated by dividing nominal GDP by the GDP deflator (R).

Real GDP= Nominal GDP/ GDP deflator

This formula helps measure inflation since the designated base year. That’s the ratio of what it would cost today compared to the base year. It's similar to the Consumer Price Index but is measured differently. 

Understanding the growth rate of real GDP

Real GDP is essentially a macroeconomic statistic that determines the value of the products and services produced by an economy in a specific period, altered for inflation. Ideally, it determines a country's total economic output, adjusted for price changes. Governments use both nominal and real GDP as parameters for evaluating economic growth and buying power over a specific timeframe. 

This is measured with the help of the GDP price deflator (also identified as the implicit price deflator), which measures the changes in prices for all of the products and services produced in an economy. The GDP price deflator is said to be a more appropriate inflation measure for deciphering the economic growth than the consumer price index (CPI) because it isn't based on a fixed set of goods.

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How to calculate GDP growth by year

1. Decide on the time period you want to calculate 

The annual GDP growth rate measures the increase or decrease of the GDP from one year to the next. Knowing this measurement helps you learn whether the general economy for the country is getting better, worse or is stable over time.

GDP figures are typically calculated on a quarterly basis. To find the annual GDP growth rate specifically, use the data gathered the whole year, not just for a selected quarter.

2. Learn the GDP for two consecutive years

To find the annual GDP growth rate, you need to know the GDP of two consecutive years. This means you need to find the annual GDP for one year and the annual GDP for the next year.

If the GDP is presented quarterly, add the four quarters together for the year to find the annual GDP. 

3. Use the formula for growth rate

To measure the growth rate over the selected period of time, use the formula:

Rate: Final GDP-Initial GDP/Initial GDP

4. Interpret your result as a percentage

The growth rate formula offers you a final result as a decimal number. It needs to be converted to a percentage, which means you need to multiply the number by 100%. You can then present the annual growth rate as a percentage figure.

Parting thoughts,

When you’re stuck with your assignment writing on GDP growth rates, it’s wise to develop a clear understanding of the topic. This post helps you decipher the intricate concept in a simplified manner.

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