What is Gross Domestic Product (GDP) and what are the methods that any nation follow to calculate the GDP of the country

GDP is an aggregate measure of production equal to the sum of the gross values added of all resident and institutional units engaged in production (plus any taxes, and minus any subsidies, on products not included in the value of their outputs). GDP measures the monetary value of final goods and services – that is, those that are bought by the final user – produced in a country in a given period of time

GDP can be calculated in three different ways.

  1. The production approach – sums the “value-added” at each stage of production, where value-added is defined as total sales less the value of intermediate inputs into the production process. For example, flour would be an intermediate input and bread the final product; or an architect’s services would be an intermediate input and the building the final product.
  2. The expenditure approach – adds up the value of purchases made by final users—for example, the consumption of food, televisions, and medical services by households; the investments in machinery by companies; and the purchases of goods and services by the government and foreigners.
  3. The income approach – sums the incomes generated by production—for example, the compensation employees receive and the operating surplus of companies (roughly sales less costs).

GDP of Sri Lanka over last few years.

This below given graph shows an increase in the GDP. Since GDP is an indicator of economic growth it is more advantageous to Sri Lanka since GDP increases over last few years. But economic growth is not much likely during last few years.

YearGross Domestic ProductUS Dollar Exchange
198066,16716.53 Sri Lankan Rupees
1985162,37527.20 Sri Lankan Rupees
1990321,78440.06 Sri Lankan Rupees
1995667,77251.25 Sri Lankan Rupees
20001,257,63777.00 Sri Lankan Rupees
20052,363,669100.52 Sri Lankan Rupees
20166,718,000145.00 Sri Lankan Rupees

  1. Explain the business cycle, unemployment (all 3 categories), inflation (demand pull and cost push) and multiplier effect and what is the importance of those parameters to the economy?
    1. The business cycle: is the downward and upward movement of gross domestic product (GDP) around its long-term growth trend. The length of a business cycle is the period of time containing a single boom and contraction in sequence.
    2. Unemployment: occurs when people who are without work are actively seeking paid work. The unemployment rate is a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labor force. During periods of recession, an economy usually experiences a relatively high unemployment rate (all three categories will be explained separately)
    3. Inflation: definition, (demand pull and cost pull will be explained in detail using graphs)
    4. Multiplier effect: Definition and explanation with calculations and equations.
    5. Importance of business cycle, unemployment, and inflation and multiplier effect will be explained separately.                                                                                                                                                                                                                    What is the fiscal and monetary policy and how it will help to stabilize the economy

Fiscal policy

is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation’s economy. It is the sister strategy to monetary policy through which a central bank influences a nation’s money supply. These two policies are used in various combinations to direct a country’s economic goals.

Monetary policy

consists of the actions of a central bank, currency board or other regulatory committee that determine the size and rate of growth of the money supply, which in turn affects interest rates. Monetary policy is maintained through actions such as modifying the interest rate, buying or selling government bonds, and changing the amount of money banks are required to keep in the vault (bank reserves).

How fiscal and Monetary Policy will support to stabilize the economy

Explain different types of money definitions and components of those categories. What influence on money demand and money supply and how it effect on the different types of money categories

4.1 There are three types of money recognized by economists –

Commodity money

Representative money

Fiat money (each will be given with definitions and explained)

4.2 Money demand

4.3 Money supply (each will be given with definitions and explained)

4.4 Influences on money demand and money supply will be listed and explained.

4.5 Affects on the different types of monetary categories by change in money demand and supply.

  1. Explain following concepts (Each and every concept will be explained separately )
    1. Explicit cost
    2. Implicit Cost
    3. Economies of scale (graphs will be used)
    4. Diseconomies of scale (graphs will be used)
    5. Critical evaluation on benefits and down falls of economies of scale and diseconomies of scale
  2. Four market model and how it operate in the market. Characteristics of each market and valid examples given for each and every market condition.
    1. Advantages / disadvantages of four market types.
  3. Select an organization (sector can be very) that handling imports of certain product (ex: automobile, milk powder) to your country and discuss comparative advantage of importing that specific product. Further, identify certain trade barriers, exchange rate and international trade argument influence on selected product during the process of import.

(Graphs will be used to explain

Trade barriers and international trade argument will be discussed separately regarding process of import)

  1. What is European Monetary Union (EMU) : Definition will be given
    1. At what extent certain countries of EMU facing the consequences of unstable financial position and how it will effect on the small and medium scale businesses (A detailed impact analysis will be done on economic indicators and their effects)
  2. What is emerging market? Definition

9.1When businesses moving towards the emerging markets (advantages and disadvantages to businesses and country )

9.2 What are the barriers and opportunities they are experiencing (explained with examples)