Friday, March 13, 2009

What Is Gross Domestic Product?

A Back to Basics article in the magazine Finance and Development that the IMF publishes explains everything an IB economics student needs to know about GDP.

"Many professions commonly use acronyms. To doctors, accountants, and baseball players, the letters MRI (magnetic resonance imaging), GAAP (generally accepted accounting principles), and ERA (earned run average), respectively, need no explanation. To someone unfamiliar with these fields, however, without an explanation these acronyms are a stumbling block to a better understanding of the subject at hand.

Economics is no different. Economists use many acronyms. One of the most common is GDP, which stands for gross domestic product. It is often cited in newspapers, on the television news, and in reports by governments, central banks, and the business community. It has become widely used as a reference point for the health of national and global economies. When GDP is growing, especially if inflation is not a problem, workers and businesses are generally better off than when it is not."
To continue reading the article, click here.

Another, interesting article found in the same issue of the magazine is 'The Crisis through the Lens of History':
"Economic history is back in vogue. In the first half of 2008, surging prices of oil and other commodities revived unhappy memories of the stagflation of the 1970s. More recently, the extraordinary intensification of the global financial crisis since the mid-September collapse of Lehman Brothers has brought back an even more ominous specter from the past—the Great Depression of the 1930s.

Comparing the present financial crisis to the deepest and most devastating economic cataclysm in modern history may seem a stretch, but there is now no question that the ongoing crisis has become the most dangerous of the post–World War II era. It is not so much the depth of the downturn in individual countries—devastating financial collapses have occurred before in advanced as well as in emerging economies—but its pervasive reach into all corners of the world economy that has created a threat to global prosperity not experienced in 70 years.

But how large is the present financial crisis by past standards? And, crucially, what will be its likely economic impact and what can be done to contain the damage and pave the way for economic revival? Economic history can help answer these questions, offering both a useful perspective for understanding the relative magnitude and seriousness of the current crisis and invaluable lessons that can be applied to resolving it."
Click here to continue reading it. PDF versions to download, save and print are also available. Do me the favor and check out the magazine site as I'm sure you will find other interesting (and often helpful for the May exams) material.

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