An Analysis Of The Italian Economy And Its GDP

INTRODUCTION Foundations of Economics for Finance Course: BSc Banking and International Finance An Analysis Of The Italian Economy And Its GDP Word count: 1907 Words CONTENTS Introduction page. 3 The Gross Domestic Product page. 3 Italy's economic history page. 4 Italy's current situation page. 5 Inflation page. 6 Intervening on NX page. 8 Intervening on C page. 9 Employment page. 10 The Balance of Payment page. 11 Conclusion page. 12 Bibliography & references page. 13 Introduction The Italian economy is one of the ten strongest economies in the world in terms of GDP, yet it lags behind the German, British and French economies. Italy also has one of the world's largest black markets which contributes significantly to national GDP. This report analyses Italy's current and historic position as an economic power and also looks at where its future may lie. By assessing the government's objectives this report will aim to analyse the previous and current position of Italy. Gross Domestic Product A large proportion of the following report discusses gross domestic product. For this reason it is important for us to look at the basic definition of GDP and the various methods of calculating it. A country's Gross domestic product (GDP) is one of several measures of the size of its economy. The Gross domestic product is `the total money value of all final goods and services produced in an economy over a one-year period.' GDP can be measured in one of three ways: The Output Approach: the sum of the value added by each industry in producing the year's output. The Income Approach: the sum of factor incomes received from producing the year's output. The Expenditure Approach: the sum of expenditures on the year's domestic output of goods and services.1 It should be noted therefore that; National Output = National Income = National Expenditure. Each of the listed approaches are merely different ways of looking at the same thing. Italy's Economic History Up until the 1950's, Italy was mainly an agricultural economy. Between 1950 and the 1990's Italy grew as an industrial nation. At the end of this transformation around 35% of the country's annual GDP was derived from industry with only 4% coming from agriculture. This shift from an agricultural economy to an industrial economy was accompanied by a massive rise in the Italian GDP which the relationship deficit/pil grew to 57,917 million euro in 2000. This translated in a GDP pro capita which reached €22,178.41 per person in 2002. Figure 1.1a below summarizes this strong increase in GDP over the last 20 years whilst in figure 1.1b Italian GDP is compared with the EU region, Germany and France from 1992 to 2006. Figure 1.1a Figure 1.1b Italy's Current Situation The economic miracle witnessed after WWII, culminated in the famous 1987 surpass - when Italy officially announced that its GDP had overtaken that of Britain's. Since then Italy's economy has lost much of its competitiveness to other countries. Italy's GDP Continua »