Show Definition GDP stands for "Gross Domestic Product" and represents the total monetary value of all final goods and services produced (and sold on the market) within a country during a period of time (typically 1 year).Purpose GDP is the most commonly used measure of economic activity.History The first basic concept of GDP was invented at the end of the 18th century. The modern concept was developed by the American economist Simon Kuznets in 1934 and adopted as the main measure of a country's economy at the Bretton Woods conference in 1944.What does"Gross" stand for?"Gross" (in "Gross Domestic Product") indicates that products are counted regardless of their subsequent use. A product can be used for consumption, for investment, or to replace an asset. In all cases, the product's final "sales receipt" will be added to the total GDP figure. In contrast, "Net" doesn't account for products used to replace an asset (in order to offset depreciation). "Net" only shows products used for consumption or investment. What does"Domestic" stand for? (GDP vs. GNP and GNI)Domestic (GDP) National (GNP) GNI What does "Product" stand for?"Product" (in "Gross Domestic Product") stands for production, or economic output, of final goods and services sold on the market. Included in GDP:
Not included in GDP:
Nominal (Current) GDP vs Real (Constant) GDPNominal GDP (or "Current GDP") = face value of output, without any inflation adjustment Real GDP (or "Constant GDP") = value of output adjusted for inflation or deflation. It allows us to determine whether the value of output has changed because more is being produced or simply because prices have increased. Real GDP is used to calculate GDP growth. How to calculate GDPGDP can be calculated in three ways: using the production, expenditure, or income approach. All methods should give the same result.
The formula for calculating GDP with the expenditure approach is the following:
or, expressed in a formula:
GDP is usually calculated by the national statistical agency of the country following the international standard. In the United States, GDP is measured by the Bureau of Economic Analysis within the U.S. Commerce Department. The international standard for measuring GDP is contained in the System of National Accounts, compiled in 1993 by the International Monetary Fund (IMF), the European Commission, the Organization for Economic Cooperation and Development (OECD), the United Nations (UN), and the World Bank. GDP Growth RateSee also: Global GDP Growth Rate The GDP growth rate measures the percentage change in real GDP (GDP adjusted for inflation) from one period to another, typically as a comparison between the most recent quarter or year and the previous one. It can be a positive or negative number (negative growth rate, indicating economic contraction). GDP per capitaSee also: List of Countries by GDP per Capita GDP per capita is calculated by dividing nominal GDP by the total population of a country. It expresses the average economic output (or income) per person in the country. The population number is the average (or mid-year) population for the same year as the GDP figure. See also
Gross domestic product (GDP) is the standard measure of the value added created through the production of goods and services in a country during a certain period. As such, it also measures the income earned from that production, or the total amount spent on final goods and services (less imports). While GDP is the single most important indicator to capture economic activity, it falls short of providing a suitable measure of people's material well-being for which alternative indicators may be more appropriate. This indicator is based on nominal GDP (also called GDP at current prices or GDP in value) and is available in different measures: US dollars and US dollars per capita (current PPPs). All OECD countries compile their data according to the 2008 System of National Accounts (SNA). This indicator is less suited for comparisons over time, as developments are not only caused by real growth, but also by changes in prices and PPPs. gross domestic product (GDP), total market value of the goods and services produced by a country’s economy during a specified period of time. It includes all final goods and services—that is, those that are produced by the economic agents located in that country regardless of their ownership and that are not resold in any form. It is used throughout the world as the main measure of output and economic activity. In economics, the final users of goods and services are divided into three main groups: households, businesses, and the government. One way gross domestic product (GDP) is calculated—known as the expenditure approach—is by adding the expenditures made by those three groups of users. Accordingly, GDP is defined by the following formula:
GDP = Consumption + Investment + Government Spending + Net Exports or more succinctly as
GDP = C + I + G + NX
where consumption (C) represents private-consumption expenditures by households and nonprofit organizations, investment (I) refers to business expenditures by businesses and home purchases by households, government spending (G) denotes expenditures on goods and services by the government, and net exports (NX) represents a nation’s exports minus its imports. The expenditure approach is so called because all three variables on the right-hand side of the equation denote expenditures by different groups in the economy. The idea behind the expenditure approach is that the output that is produced in an economy has to be consumed by final users, which are either households, businesses, or the government. Therefore, the sum of all the expenditures by these different groups should equal total output—i.e., GDP. Each country prepares and publishes its own GDP data regularly. In addition, international organizations such as the World Bank and the International Monetary Fund (IMF) periodically publish and maintain historical GDP data for many countries. In the United States, GDP data are published quarterly by the Bureau of Economic Analysis (BEA) of the U.S. Department of Commerce. GDP and its components are part of the National Income and Product Accounts data set that the BEA updates on a regular basis. When an economy experiences several consecutive quarters of positive GDP growth, it is considered to be in an expansion (also called economic boom). Conversely, when it experiences two or more consecutive quarters of negative GDP growth, the economy is generally considered to be in a recession (also called economic bust). In the United States, the Business Cycle Dating Committee of the National Bureau of Economic Research is the authority that announces and keeps track of official expansions and recessions, also known as the business cycle. A separate field within economics called the economics of growth (see economics: Growth and development) specializes in the study of the characteristics and causes of business cycles and long-term growth patterns. Growth economists doing research in that field try to develop models that explain the fluctuations in economic activity, as measured primarily by changes in GDP. GDP per capita (also called GDP per person) is used as a measure of a country’s standard of living. A country with a higher level of GDP per capita is considered to be better off in economic terms than a country with a lower level. Get a Britannica Premium subscription and gain access to exclusive content. Subscribe Now GDP differs from gross national product (GNP), which includes all final goods and services produced by resources owned by that country’s residents, whether located in the country or elsewhere. In 1991 the United States substituted GDP for GNP as its main measure of economic output. |
What is the total money value of the goods and services produced by the Nationals during a given?
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