Gross Domestic Product (GDP)

Examples of Gross Domestic Product (GDP) in the following topics:

• GDP per capita

  • Gross domestic product (GDP) per capita is the mean income of people in an economic unit.
  • Gross domestic product (GDP) per capita is also known as income per person.
  • GDP per capita is calculated by dividing GDP by the total population of the country.
  • It is useful because GDP is expected to increase with population, so it may be misleading to simply compare the GDPs of two countries.
  • GDP per capita accounts for population size.

• Gross Domestic Product

  • Under economic theory, GDP per capita exactly equals the gross domestic income (GDI) per capita.
  • Estimating the gross value of domestic output in various economic activities;
  • For measuring gross output of domestic product, economic activities (i.e. industries) are classified into various sectors.
  • If GDP is calculated this way, it is sometimes called Gross Domestic Income (GDI).
  • Depreciation (or capital consumption allowance) is added to get from net domestic product to gross domestic product.

• Economic measures

  • The Gross Domestic Product or GDP of a country is a measure of the size of its economy.
  • While often useful, it should be noted that GDP only includes economic activity for which money is exchanged.
  • GDP and GDP per capita are widely used indicators of a country's wealth.
  • The map below shows GDP per capita of countries around the world:
  • A map of world economies by size of GDP (nominal) in $US, CIA World Factbook, 2012.

• Calculating Real GDP

  • The Gross domestic Product (GDP) is the market value of all final goods and services produced within a country in a given period of time.
  • GDP = private consumption + gross investment + government investment + government spending + (exports - imports).
  • For the gross domestic product, "gross" means that the GDP measures production regardless of the various uses to which the product can be put.
  • Production can be used for immediate consumption, for investment into fixed assets or inventories, or for replacing fixed assets that have depreciated.
  • "Domestic" means that the measurement of GDP contains only products from within its borders.

• Defining Aggregate Expenditure: Components and Comparison to GDP

  • The aggregate expenditure is one of the methods that is used to calculate the total sum of all the economic activities in an economy, also known as the gross domestic product (GDP).
  • The gross domestic product is important because it measures the growth of the economy.
  • The GDP is calculated using the Aggregate Expenditures Model .
  • An economy is at equilibrium when aggregate expenditure is equal to the aggregate supply (production) in the economy.
  • A shift in supply or demand impacts the GDP.

• Other Approaches to Calculating GDP

  • Gross domestic product provides a measure of the productivity of an economy specific to the national borders of a country .
  • GDP calculated in this manner is sometimes referenced as "Gross Domestic Income" (GDI).
  • Depreciation (or Capital Consumption Allowance) is added to get from net domestic product to gross domestic product.
  • GDP = compensation of employees + gross operating surplus + gross mixed income + taxes less subsidies on production and imports.
  • So, adding taxes less subsidies on production and imports converts GDP at factor cost (as noted, a net domestic product) to GDP.

• Defining GDP

  • Gross domestic product is the market value of all final goods and services produced within the national borders of a country for a given period of time.
  • Gross domestic product (GDP) is the market value of all final goods and services produced within the national borders of a country for a given period of time.
  • "Investment" in GDP does not mean purchases of financial products.
  • "X" (exports) represents gross exports.
  • Depreciation (or Capital Consumption Allowance) is added to get from net domestic product to gross domestic product.

• Learning from GDP

  • There are two commonly used measures of national income and output in economics, these include gross domestic product (GDP) and gross national product (GNP).
  • GDP limits its focus to the value of goods or services in an actual geographic boundary of a country, where GNP is focused on the value of goods or services specifically attributable to citizens or nationality, regardless of where the production takes place.
  • Formula: GDP (gross domestic product) at market price = value of output in an economy in the particular year - intermediate consumption at factor cost = GDP at market price - depreciation + NFIA (net factor income from abroad) - net indirect taxes.
  • Formula: GDI (gross domestic income, which should equate to gross domestic product) = Compensation of employees + Net interest + Rental & royalty income + Business cash flow
  • Formula: Y = C + I + G + (X - M) ; where: C = household consumption expenditures / personal consumption expenditures, I = gross private domestic investment, G = government consumption and gross investment expenditures, X = gross exports of goods and services, and M = gross imports of goods and services.

• Calculating GDP

  • Gross domestic product is one method of understanding a country's income and allows for comparison to other countries .
  • The income approach adds up the factor incomes to the factors of production in the society.
  • The output approach is also called "net product" or "value added" method.
  • Deducting intermediate consumption from gross value to obtain the net value of domestic output.
  • GDP at factor cost plus indirect taxes less subsidies on products is GDP at producer price.

• The GDP Deflator

  • The GDP deflator is a price index that measures inflation or deflation in an economy by calculating a ratio of nominal GDP to real GDP.
  • The GDP deflator (implicit price deflator for GDP) is a measure of the level of prices of all new, domestically produced, final goods and services in an economy.
  • In contrast, real gross domestic product accounts for price changes that may have occurred due to inflation.
  • Real GDP reflects changes in real production.
  • The GDP deflator is calculated by dividing nominal GDP by real GDP and multiplying by 100 .