How The Gross Domestic Product Plays A Major Part Of Our Economy

1159 words - 5 pages

GDP (Gross Domestic Product) plays a major part of our economy. It is the total market value of all final goods & services produced in a given year by factors of production located within a nation’s borders. It continually changes every year, and it is never known when or how it will change until the end of each quarter. It may rise 3 percent one quarter, and then decline to 2 percent another quarter. There are immense amounts of things that could affect GDP resulting in a decrease in the economy. Changes/affects due to the expenditures approach or the income approach could mess with GPD as well. Unemployment, underemployment, and discouraged workers can cause GDP to take a downturn because if people are unemployed, under-employed, or their discouraged workers, less productions of manufactured products are happening, thus negatively affecting GDP and the economy.
As of today, there are millions of women and men that are currently unemployed. This unfortunate problem is negatively affecting the economy. With the economy getting affected, it causes GDP to take a downturn as well. When there are millions of people that are out of work, fewer productions are being made. Unemployment is defined as a situation where someone of working age is not able to get a job but would like to be in full time employment. (Pettinger 1) Perrucci If there are currently millions of people out of work, then GDP is going to go down. There are currently many different types of unemployment. The four types of unemployment: frictional, structural, cyclical, and seasonal. Frictional unemployment occurs when workers lose their current job and are in the process of finding a new one. (Unemployment types and causes 3) Structural unemployment occurs when certain industries decline because of long term changes in market conditions. (Unemployment types and causes 3) Cyclical unemployment exists when individuals lose their jobs as a result of a downturn in aggregate demand (AD). (Unemployment types and causes 3) The last type of unemployment is seasonal unemployment, which is when people are unemployed due to the season. The most frequent unemployment is frictional. If there are less people out of work, then there are less amounts of income coming into households, which means less people are spending money to make demand go up. Economists call unemployment a lagging indicator of the economy, as the economy usually improves before the unemployment rate starts to rise again. (Hudson 2) It has been said that unemployment causes a sort of ripple effect across the economy. (Hudson 2) When someone loses their job, and they become unemployed, that means that the person is not paying for any taxes because they have to worry about saving their own money that they have to live off of which is not that much. The business cycles can also have something to do with altering the economy which can further cause GDP to go decrease exponentially. When a recession hits the economy, the unemployment...

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