Re: isi

Posted by aditi5000 on May 11, 2012; 7:56am
URL: http://discussion-forum.276.s1.nabble.com/isi-tp7542957p7549568.html

gdp is the value of current production - in this economy, not only has consumption not occurred but on top of that residents have spent money (which could have been spent domestically) on foreign goods so our gdp becomes -ve.

purchasing power of the residents has reduced because they have spent their income on importing when in fact they could have spent it in our economy (had production taken place)...... by virtue of importing, domestic Indian income goes abroad - its like an opportunity cost our economy bears for not producing (i am saying this only for the sake of explaining - not to be taken literally) we remove the value of imports from gdp because it is a reduction of our production capacity! (just understnad the analogy)

like in a real country we won't have rs.600 as investment, 250 as improts and so on, we wont have gdp which is negative but this is just a make believe situation so hypothetically gdp can be -ve