Although GDP is normally reported at the national level it i

Although GDP is normally reported at the national level, it is also possible to calculate GDP for smaller areas (such as states, or even counties within a state). For this activity go to http://bea.gov/index.htm and retrieve information on GDP for the state of Washington and the state of North Dakota. Obtain the most recent data available.

A. Using the GDP equation, distinguish what factors may cause these numbers to be different.

B. Using the same two states compare the level of GDP in 2008 versus GDP in 2015. How do the two values compare? Analyze what factors you think are driving this difference

Solution

Answer;

GDP or gross domestic product measures the output of an economy and it can be measured by three approaches like expenditure approach, production approach and income approach.

A)

If we consider the expenditure approach then the components of GDP are

GDP = C(Consumption) + I(Investment) + G(Government expenditure) + XM(Net export).

Consumption is basically personal consumption whereas investment is domestic business investment.

If any one of the components changes, the total GDP will change. If consumption, investment or G increases then, total GDP will increase. Net export is the export minus import, if import increases then GDP will be adversely affected and if export increases GDP will increase.

GDP of North Dakota is increasing over time after 2009. In 2008 there was financial crisis in the market so, the GDP fell in 2009 but it has been continuously increasing after that time. The same thing happens in case of Washington. In 2008 there was a reduction in the total GDP and it was present in 2009. After that it has been increasing continuously.

B) Washington\'s real GDP in 2008 was $352907 million that was reduced to 2009 due to the economic crisis in the economy that reduced the investment in the economy. Many businesses and persons declared themselves as bankrupts in US. In 2015 real GDP was near around $422877 million and Washington faces the most improvement in their economy as it was not very poor situation during crisis relative to other states. In 2008 the GDP is near around $32128 million and it falls down to $32008 million due to the economic crisis. In 2015 it has increased to a significant amount because of the improvements in the factors of GDP.

In the 2008 the important factor affecting GDP is investment which was decreased during this period. In 2015 the important factor that affects the GDP is consumption expenditure that increases the GDP amount over time.