Gross domestic product

From Wikipedia, the free encyclopedia
Jump to: navigation, search

In economics, gross domestic product (GDP) is how much a place produces in some amount of time. GDP can be calculated by adding up its output inside the borders of that country.

To find the GDP of a country, one adds up all consumer spending (C), all investment (I), all government spending minus taxes (G), and the value of exports minus imports (X – M). This is shown by the equation:

This measure is often used to find out how healthy a country; a country with a high value of GDP can be called a large economy. The biggest GDP in the world is the United States.[1] Germany is the largest in Europe,[2] Nigeria in Africa[3] and China in Asia.[4]

There are different ways to calculate the GDP. Nominal GDP is the total amount of money spent on all new and final goods in an economy, real GDP (adjusting for changes in prices) tries to correct this number for inflation. For example, if the prices rise by 2% (meaning, everything costs 2% more) and the nominal GDP grows by 5%, the real GDP growth is only increases by 3%.

GDP per capita is the total income of a country, divided by the number of inhabitants. It shows how rich people, on average, are.

Gross national product[change | change source]

The GDP measure is different from gross national product (GNP) in that GNP = GDP + net income from assets in other countries (net income receipts).

References[change | change source]

  1. Economic Power in a Changing International System - Page 25, Ewan W. Anderson, Ivars Gutmanis, Liam D. Anderson - 2000
  2. OECD Reviews of Regulatory Reform, 2004, p 92
  4. China and the World Economy, Yih-chyi Chuang, Simona Thomas - 2010