Week 5 Team Comparative And Absolute Advantage

Comparative and Absolute Advantage Name Course Tutors Name Date Comparative and Absolute Advantage The Gross Domestic Product (GDP is the most important traditional measure of economic growth. GDP includes investment, labour productivity and real wages in its calculation of economic growth. Real GDP excludes the effect of inflation and is usually considered the most important economic statistic for international comparisons. Calculation of GDP excludes unpaid services such as childcare, volunteer work and illegal activities. Therefore, GDP is not a measure of well-being, as it does not account for illegal activities or non-monetary activities that increase the well-being of society. The advantage of using GDP, as a measure of economic growth is that provides a rough guide of the level of economic activities, indicates economic cycles and converts the productive output of an economy into monetary terms. As GDP measures economic growth in terms of the dollar value of all products entered in the market during a specified period, it is easy to compare across nations and geographic regions (Rios, McConnell, Brue, 2013). Comparative advantage is the single most important measure of a countrys performance in the international trade. Comparative advantage refers to a countrys advantage in producing goods at a