Gross Domestic Product Refers to the Total

Gross Domestic Product refers to the total worth of final goods and services produced within the nation in a given year. GDP accounts for the income generated as per the location it is earned instead of the owner of the factor of production. (Gross Domestic Product) GDP thus is an aggregate quantification of the total worth of the net output of all the domestic producing units of a nation or territory during particular period. It is pertinent to note that the GDP is associated with the net output not 'gross output'. This cannot be derived by simply adding all the gross output of each of the producing units to attain a meaningful figure on total production of the economy since there would be a plethora of double counting. GDP is determined on the basis of the 'value added' at each stage. (Introduction to Gross Domestic Product (GDP) Gross National Product (GNP) Balance of Payments (BoP) Statistics)

Gross Domestic Products incorporate only the final products and services. It eliminates the possibility of double or multiple counting, by excluding any intermediate goods used in production of such final goods or services. GDP accounts for the actual production of the nation over the year and not the goods or services that are actually sold. It excludes non-production transaction. The measurement is not inclusive of non-productive transactions, and is designed to quantify what is actually produced or generated over the current period. The prevailing assets or property associated with selling and transfer during the period is not incorporated for the purpose of counting. The welfare measures such as transfer payments like extension of social security measures and cash welfare benefits are not incorporated while counting the GDP. (Chapter 7 Measuring Domestic Output, National Income, and the Price Level)

Even the private transfer payments such as student allowances or alimony payments are also excluded from counting. So also the sale of stocks and bonds are not included in the accounting process. It is pertinent to note that GDP fails to quantify some of the useful output on the plea that those are not paid, such as home makers' services, parental child care, volunteer efforts, and home improvement projects. GDP fails to quantify the improvements in the product quality or make allowances for enhanced leisure time. GDP does not quantify improved living standards in consequence with more leisure. GDP makes no value adjustments for variations in the constituents of output or the distribution of income. (Chapter 7 Measuring Domestic Output, National Income, and the Price Level)

DQ2.

Several types on unemployment prevail in the real conditions of labor market. They are grouped under the heads of demand-deficient or cyclical unemployment, seasonal unemployment, frictional or search unemployment and structural unemployment. The Demand deficient unemployment results when there is no sufficient demand to employ all those who desire to work. It is a kind of unemployment that the Keynesian economists concentrate on specifically, while they believe it to happen when there is disequilibrium in the economy. It is also sometimes recognized as cyclical unemployment since it will change with the trade cycle. Seasonal unemployment as the very concept indicates, implies the employment for only a particular period of the year and for the rest of the periods they are unemployed. (Unemployment Theories - Types of Unemployment - Which type is typical?)

The impact of the seasonal unemployment is mostly regionalized. The worker leaving a job and searching for another one temporarily creates unemployment involving a reasonable period of time in pursuit of the right job. This generates unemployment while they go on searching for the right job. The more efficient the job market in providing the people work the lesser the magnitude of such type of unemployment. Such type of unemployment is known as frictional or search unemployment. This unemployment is resulted out of the imperfect information in the market. The structural unemployment is another form of unemployment that results out of variations in the structure of industries. As an economy improves over time the type of industries may well vary. Such type of unemployment depends largely upon the mobility of labor, the pace of change in the economy, the regional structure of industry. (Unemployment Theories - Types of Unemployment - Which type is typical?)

The impact of unemployment is mostly individualistic. However, the economy is aggregate of such individualistic perceptions and is affected greatly with such types of unemployment. In addition to such microeconomic costs of unemployment there also prevails the macro economic effects such as 'loss of output to the economy, loss of tax revenue, increase in government expenditure, loss of profits etc.'. (Unemployment Theories - Costs of Unemployment - Who pays?) Many economists such as Alan Greenspan, chairman, Federal Reserve Board, pointed out that an increasing rate of inflation is quite inevitable so as to drive the economy on its current course that gives rise to a natural rate of unemployment. Hence the zero rate of unemployment is neither feasible nor desirable. (Zero is not the optimal rate of inflation)

D3:

Fiscal policy indicates a set of economic activity of government with regard to the raising of revenue and spending and investment for public purposes. The revenue raising policies include taxation, public debt, and fixation of user charges on social assets and services or by fiat. The policies with regard to expenditure include deficit spending to enhance demand for domestic goods and services efforts to curtail deficits to raise the budget surplus to fight inflation. Taking into consideration the different situations government may implement certain policies that can either enhance or decline output in the short run. To illustrate, the government may resort to expansionary fiscal policy when it confronts a threat of a recession. (Fiscal Policy)