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

Gross Domestic Production - Essay ExampleFrom the in a higher place equation employee compensation, operating surplus and mixed income added together are referred to as factor income. It is therefore evident that this method involves adding up income earned by factors of production.This is some other method used in calculating GDP and the method involves adding up the unit rise in prices of products in the production stages. Therefore this method involves adding up contributions of the factors of production that add value to a product. Value is added either through services rendered and goods used to process final products.However calculation of GDP use the above three methods should be the same, the expenditure method is commonly used in many countries to calculate GDP due to the availability of data, the following is an abbreviation of changes in GDP due to increase in production and change in price.The following information on the production of a good is provided, Lenovo produ ces 10,000 units of a product with a market value of 2,000 each in 2009 December however no units are sold until spring of 2010. The following are the requirementsFor this ground therefore the Lenovo products produced and not sold in this year will increase the level of investment in terms of an increase in inventory, the following is a summary of the calculationsGiven that 10,000 units were produced and the market price of these products is 2,000 then it is possible to determine the GDP level increase as a result of this production, the value of these products is obstinate by multiplying the quantity produced and the prevailing market price, and the following formula is usedValue of products = quantity X price (Obstfeld (1997))Substituting the values as follows10,000 X 2,000 = 20,000,000 dollarsFrom the above calculation therefore it is evident that the GDP level in 2009 will increase by 20,000,000 dollars, this increase will be as a result of the increase in investment in the yea r 2009.b) GDP increase in 2010The GDP level will be affected in 2010 there will be an increase in consumption in this year