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The gross domestic product

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CA Priyadarshan Behera
CA Priyadarshan Behera

GDP is the total value of goods and services produced within a country's borders in a specific time period. It is an accurate measure of the size of an economy and GDP growth rate indicates economic growth. GDP can be calculated through the expenditure approach, which sums total consumption, government spending, investment, and net exports, or through the income approach, which sums what everyone earned. Both approaches should produce the same GDP result.

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GROSS DOMESTIC PRODUCT The Gross Domestic Product (GDP) And Its Importance:Gross Domestic Product (GDP) is one of the most widely used measures of an economys output or production. It is defined as the total value of goods and services produced within a countrys borders in a specific time period monthly, quarterly or annually. GDP is an accurate indication of an economy's size, while GDP per capita has a close correlation with the trend in living standards over time, and the GDP growth rate is probably the single best indicator of economic growth. As Nobel laureate Paul A. Samuelson and economist William Nordhaus put it, While GDP and the rest of the national income accounts may seem to be arcane concepts, they are truly among the great inventions of the twentieth century. Heres why. GDP Calculations :GDP can be calculated either through the expenditure approach (the sum total of what everyone in an economy spent over a particular period) or the income approach (the total of what everyone earned). Both should produce the same result. A third method the value-added approach is used to calculate GDP by industry. Expenditure-based GDP produces both real (inflation-adjusted) and nominal values, while the calculation of income-based GDP is only carried out in nominal values. The expenditure approach is the more common one and is obtained by summing up total consumption, government spending, investment and net exports. Thus, GDP = C + I + G + (X M), where C is private consumption or consumer spending; I is business spending; G is government spending; X is exports, and M is imports.

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The gross domestic product

  • 1. GROSS DOMESTIC PRODUCT The Gross Domestic Product (GDP) And Its Importance:Gross Domestic Product (GDP) is one of the most widely used measures of an economys output or production. It is defined as the total value of goods and services produced within a countrys borders in a specific time period monthly, quarterly or annually. GDP is an accurate indication of an economy's size, while GDP per capita has a close correlation with the trend in living standards over time, and the GDP growth rate is probably the single best indicator of economic growth. As Nobel laureate Paul A. Samuelson and economist William Nordhaus put it, While GDP and the rest of the national income accounts may seem to be arcane concepts, they are truly among the great inventions of the twentieth century. Heres why. GDP Calculations :GDP can be calculated either through the expenditure approach (the sum total of what everyone in an economy spent over a particular period) or the income approach (the total of what everyone earned). Both should produce the same result. A third method the value-added approach is used to calculate GDP by industry. Expenditure-based GDP produces both real (inflation-adjusted) and nominal values, while the calculation of income-based GDP is only carried out in nominal values. The expenditure approach is the more common one and is obtained by summing up total consumption, government spending, investment and net exports. Thus, GDP = C + I + G + (X M), where C is private consumption or consumer spending; I is business spending; G is government spending; X is exports, and M is imports.