Trade and world output Essay Example | Topics and Well Written Essays - 1250 words

Trade and world output - Essay Example This paper seeks to not only survey what trade and world output are all about but to also show their relation. Trade may be construed top refer to the business of transacting i.e. buying and selling of securities or commodities. It is also called commerce. Alternatively, trade may also refer to the willing transfer of goods or services or a combination of both from one party to another. One party is termed as the seller and the other the buyer or consumer. Therefore, for a transaction to be complete, and therefore say that trade has taken place, there must be the buyer, the seller, the commodity presented as goods or services or both and above all willingness for transfer of the commodities at agreed terms. Initially, the kind of trade done by our fore fathers was mainly barter trade but presently, many businessmen negotiate transactions through a medium of exchange called money. The two many types of trades may be distinguished by the number of parties involved in a transaction. For instance, trade between two traders or businessmen is termed as bilateral trade whereas that between more tha n two is said to be multilateral trade (US Congress, 1984). On the other hand the concept of world output needs to be understood before its relationship with trade can be highlighted. World Output is also called Gross world product (GWP) and it is the sum total Gross National Product (GNP) of all the nations in the whole world. Further, to understand GWP, there is need to define what GNP is all about. GNP is the measure of the average output of a country. Therefore, when all the average outputs of all countries in the world are added together they give the GWP. Gross Domestic Product, GDP also called Gross Domestic Income, GDI, of a country is the is the total cost of all the finished goods and services produced that particular country within stipulated period of time (usually a year). The other meaning of GDP is the sum total of all profits at every level of production of the finished goods and products in a country in a year. GDP is slightly different from GNP in that GNP, in its calculation includes foreign income usually in terms of inve stment which is not the case with GDP. Therefore, as said earlier, the GNP of each country is very important in the determination of the world output (Stutely, 2003). In the establishment of the relation between GNP and world output otherwise called GWP trade is implied because GNP is said to be the measure of the output of nationals in a given country. It usually focuses mainly on the parties that own the production. For instance, the measure of GNP revolves around American firms without regard of their location. The firms are the owners of production and this production is nothing without trade. Come to think of production: Purchase of raw material, conversion into finished goods and selling of the finished goods. So you reckon that trade is at every level of production and this production determined GNP ant this automatically tells us that trade determines or rather plays a major role in GNP and since sum total of GNP of all countries realizes the GWP, then trade determines GWP. This conclusion points to the relation between trade and world output (GWP) which simply boils down to a simple statement that the more the trade either bilateral or m ultilateral, the more the world output and vice versa. In 2005 the GWP rose by 4%. The growth was of course caused by increments in GNP of most countries with China leading the list with 9.3% followed by