Project Identification

Used as an indicator of a country’s standard of living, the gross domestic product (GDP) refers to the market value of all officially recognized final goods and services produced in a country within a specified time period (www.wikipedia.org, 2012). According to Investopedia.com (2012), the GDP is used to measure the health of a country’s economy. More so, it can be thought of as the size of the economy. The GDP represents economic production and growth and has a fairly large effect on almost everyone in the economy. In order to predict the expected U.S. GDP growth rate going forward, one would need to know how the gross domestic product is figured as well as how to interpret the GDP. In addition to these two areas, one would need to review GDP trends and statistics as well as GDP forecasts.

Studyforex.com (2012) states that “the gross domestic product is determined, or calculated, using three methods.” Method one is known as the expenditure approach and is most commonly used. In this method, the GDP is determined by calculating the final figure of total spending on goods and services (www.studyforex.com, 2012). The four main types of expenditures in a country are added together to get the GDP as shown in the formula below:

GDP = consumption + investment + government purchases + net exports

The second method, also called the product approach, determines the GDP by calculating the total market value of goods and services produced (www.studyforex.com, 2012). This method is broken down into three stages. The first stage consists of estimating the Gross Value of domestic Output in various economic activities. In stage two, the intermediate consumption (the cost of material, supplies, and services used to produce final goods and services) is determined. In the third and final stage, intermediate consumption is deducted from the Gross Value to figure the Net Value of Domestic Output (www.wikipedia.org, 2012). Moving on, the last method used to...