Essay about Fundamentals of Economics

Words: 1110
Pages: 5
Open Document
Q.: 1: The manuscript for this book was typed for free by a friend. Had I hired a secretary to do the same job, GDP would have been higher, even though the amount of output would have been identical. Why is this? Does this make sense? A.: 1: If a secretary were hired to type the manuscript, they would have had the opportunity to provide a service at a price. We know that each good and service produced and brought to market has a price. That price serves as a measure of value for calculating total output; in this case, the task of completing the typing for this book.
GDP is the total market value of all final goods and services produced within a nation’s borders in a given time period. If the job was undertaken by the secretary, the …show more content…
This value of capital used up in producing goods and services is called depreciation.
Gross and Net Investment: As capital is used, some of it wears out or becomes obsolete; it depreciates. Investment adds to the capital stock, and depreciation reduces it. Gross investment minus depreciation is net investment. If gross investment is greater than depreciation in any period, then net investment is positive and the capital stock increases. If gross investment is less than depreciation in any period, then net investment is negative and the capital stock declines.
Conclusion: Thus, NDP is the sum total of money value of final goods and services produced in a country on an accounting year excluding depreciation cost. NDP estimates how much the country has to spend to maintain the current GDP. If the country is not able to replace the capital stock lost through depreciation, then GDP will fall. In addition, a growing gap between GDP and NDP indicates increasing obsolescence of capital goods, while a narrowing gap means that the condition of capital stock in the country is improving.
-------------------------------------------------
If gross investment is not large enough to replace the capital that depreciates in a particular year, then net investment will likely be less than zero. As a result, the Production Possibilities curve shifts inward depicting inefficient use of resources.
Show More

Related Documents: Essay about Fundamentals of Economics

Examples Of Fundamentals Of Economic Decisions

ISyE 3025 Engineering Economy Fundamentals of an Economic Decision Fundamentals of an Economic Decision Jack R. Lohmann Copyright 1999. Georgia Tech Research Corporation. All rights reserved. School of Industrial and Systems Engineering Georgia Institute of Technology Fundamentals of an Economic Decision Example Overview 1 ‹ Illustrate a fundamental choice: Benefits vs. Costs ‹ Develop formal approach and notation ‹ Introduce basic decision criterion: Prospective Benefit, Bj(i), and Prospective…

Words 5630 - Pages 23

Essay about Economic Fundamentals

vary based on the efficiency and availability of the ‘factors of production’ ie. Land, labour, capital and enterprise. When efficient and available the product is then able to create economic growth. Introduction Through the use of the Product Possibility Frontier[PPF], this report aims to illustrate economic growth over the period of a century for two products. This is conducted with focus on the availability and efficiency of land, labour and capital resources. Assuming ceteris parabus -…

Words 2203 - Pages 9

Fundamentals: Economics and Macroeconomics Paper Colander

Fundamentals of Macroeconomics Paper Kisha Smith ECO/372 12/15/2012 Kathleen Byrne Fundamentals of Macroeconomics Paper Colander (2010) stated,” economics is the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social; customs, and political realities of the society” (p.4). Part I In order to understand certain aspects of economics one must be able to recognize and comprehend terms that may not be used in…

Words 755 - Pages 4

Financial Crisis and Stock Market Crash Essay

historical experience suggest that financial crises are the result of weak economic fundamentals or self-fulfilling panics? A financial crisis is ‘a disturbance to financial markets – associated with falling asset prices and insolvency, which spreads through the financial system, disrupting the market’s capacity to allocate capital.’1 Nearly all crises feature both weak fundamentals of some sort and a period of panic. If a fundamental becomes irreparably weak – that is to say a country has become insolvent…

Words 3003 - Pages 13

intermediate accounting 2 test bank Essay

Intermediate Accounting Kieso 15th Edition Test Bank Click here to download the solutions manual / test bank INSTANTLY!!! http://www.solutionsmanualtestbanks.com/2013/05/intermediate-acc ounting-kieso-15th-edition-test-bank.html Intermediate Intermediate Intermediate Intermediate Accounting Accounting Accounting Accounting Kieso Kieso Kieso Kieso 15th Edition Test Bank 15th Edition Test Bank Weygandt Warfield 15th Edition Test Bank Weygandt Warfield 15th Edition Test Bank…

Words 8328 - Pages 34

Foreign Exchange Rate Determination

policy alter expectations and thus exchange rates Theories of currency substitution follow the same basis premises of portfolio rebalance framework FINA470 Concordia University Summer 2015 8-7 Technical Analysis The forecasting inadequacies of fundamental theories has led to the growth and popularity of technical analysis, the belief that the study of past price behavior provides insights into future price movements. The primary assumption is that any market driven price (i.e. exchange rates) follows…

Words 1532 - Pages 7

Research Paper On Capitalism

The United States, working for the greatest good for the greatest amount of people, should maintain a Smithsonian, free-Capital market and limit Socialized programs for the reasons of Utilitarianism of equality, longevity of economic infrastructure, and fundamental economic ideologies. John Stewart Mill’s philosophy of Utilitarianism states “the greatest happiness of the greatest number” is the ideal model for a government. This statement derived from a book by Joseph priestly, called the Treatise…

Words 1687 - Pages 7

Ebooks Solution Manuals and Test Banks for Text Books Essay

Dear all, If u need anything from the list, do contact us anytime, we provide competitive prices and fast delivery after payment done. We are assisting students by providing them quality services regarding Solutions and Test Bank for courses. We hope that you people will like our service and get better grades. Please Contact us @ : solvedanswers@gmail.com solvedanswers@gmail.com Use CTRL + F to search the titles you looking for , if the title you searching is not in the list, do not…

Words 19224 - Pages 77

Shock Therapy Essay example

issues can be split up into two main ones, as Balcerowicz puts it: extreme macroeconomic imbalance and a faulty economic system. These two were considered the main issues according to the creator of the plan and needed to be addressed first and urgently. There were also two other subordinate issues described by Balcerowicz as a distorted economic structure and huge foreign debt. The economic strategy to eliminate these issues starting with the main two issues and followed shortly after with the subordinate…

Words 731 - Pages 3

Singapore And Hong Kong

promote growth. These theme are focusing effort on the poorest countries, post-conflict and fragile states middle-income countries global public, global public goods, the Arab world , and knowledge and learning.(World Bank, 2011).the key to successful economic development high savings rate, and in human capital. Hong Kong and Singapore were considerate newly industrialize countries (NIC ‘S) during the 1970’s and 80’s. Since it is not possible to become an industrialized nation without a market economy…

Words 669 - Pages 3