GDP in the Conditions of the Market Based Economy Essay

All goods and services that are produced within the national economy's borders during a year constitute the gross domestic product or GDP. In order to produce goods and services, a nation needs factors of production that are involved in the production process. These factors come in limited quantity. These factors are resources/land, which is the land itself and all biological and mineral resources obtained from it; labor, which is the human force within the economy; capital, which is the physical (machines, buildings) and human (skills, knowledge) capital.

In a production process those resources are combined in order to create goods and services. Technologies are also involved in a production process, and they represent the method of production, or the way in which resources are combined. It is difficult to measure the level of gross domestic product due to the fact that goods and services have different measures of volume and prices. The acronym "GDP" refers to these measures, not to the product itself. It is seemingly easy to measure the gross domestic product, since in a market-based economy everything is bought and sold in at market prices. Thus, in order to calculate the total amount of goods and services produced one has to add the selling prices of goods and services. However, some goods require other goods to be produced. Thus, in order to avoid multiple counting of some goods or services, one has to use the final value of all goods and services produced within the nation's economy.

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