GDP

(noun)

Gross domestic product (GDP) is the market value of all officially recognized final goods and services produced within a country in a given period of time.

Examples of GDP in the following topics:

  • 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.
    • In other words, real GDP is nominal GDP adjusted for inflation.
    • The GDP deflator is calculated by dividing nominal GDP by real GDP and multiplying by 100 .
    • Consider a numeric example: if nominal GDP is $100,000, and real GDP is $45,000, then the GDP deflator will be 222 (GDP deflator = $100,000/$45,000 * 100 = 222.22).
    • In the U.S., GDP and GDP deflator are calculated by the U.S.

  • Calculating Real GDP

    • Real GDP growth is the value of all goods produced in a given year; nominal GDP is value of all the goods taking price changes into account.
    • Imagine a country with a GDP of $100 in a given year.
    • The GDP is the officially recognized totals.
    • $GDP = C + I + G + (X - M)$
    • Real GDP, therefore, accounts for the fact that if prices change but output doesn't, nominal GDP would change.

  • GDP per capita

    • 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.
    • Define GDP per capita and assess its usefulness as a metric.

  • Calculating GDP

    • GDP can be calculated through the expenditures, income, or output approach.
    • The sum of net value added in various economic activities is known as GDP at factor cost.
    • GDP at factor cost plus indirect taxes less subsidies on products is GDP at producer price.
    • GDP at producer price theoretically should be equal to GDP calculated based on the expenditure approach.
    • GDP is a common measure for both inter-country comparisons and intra-country comparisons.

  • Evaluating GDP as a Measure of the Economy

    • The value of GDP as a measure of the quality of life for a given country may be limited.
    • Therefore, growth could be misinterpreted by looking at GDP values in isolation.
    • The sensitivities related to social welfare has continued the argument specific to the use of GDP as a economic growth or progress metric.
    • Although GDP provides a single quantitative metric by which comparisons can be made across countries, the aggregation of elements that create the single value of GDP provide limitations in evaluating a country and its economic agents.
    • Assess the uses and limitations of GDP as a measure of the economy

  • Other Approaches to Calculating GDP

    • The income approach evaluates GDP from the perspective of the final income to economic participants.
    • GDP calculated in this manner is sometimes referenced as "Gross Domestic Income" (GDI).
    • GDP = COE + GOS + GMI + TP & M – SP & M
    • It measures the value of GDP at factor (basic) prices.
    • So, adding taxes less subsidies on production and imports converts GDP at factor cost (as noted, a net domestic product) to GDP.

  • Defining GDP

    • GDP can be determined in multiple ways.
    • The income approach and the expenditure approach highlighted below should yield the same final GDP number .
    • Y = C + I + G + (X − M) is the standard equational (expenditure) representation of GDP.
    • "Investment" in GDP does not mean purchases of financial products.
    • Two non-income adjustments are made to the sum of these categories to arrive at GDP:

  • Defining Aggregate Expenditure: Components and Comparison to GDP

    • The GDP is calculated using the Aggregate Expenditures Model .
    • In contrast, when there is an excess of expenditure over supply, there is excess demand which leads to an increase in prices or output (higher GDP).
    • A rise in the aggregate expenditure pushes the economy towards a higher equilibrium and a higher potential of the GDP.
    • It is used to determine and graph the real GPD, potential GDP, and point of equilibrium.
    • A shift in supply or demand impacts the GDP.

  • GDP Equation in Depth (C+I+G+X)

    • GDP is the sum of Consumption (C), Investment (I), Government Spending (G) and Net Exports (X – M): Y = C + I + G + (X - M).
    • GDP (Y) is a sum of Consumption (C), Investment (I), Government Spending (G) and Net Exports (X – M):
    • Also, it is important to note that goods such as hand-knit sweaters are not counted as part of GDP if they are gifted and not sold.
    • In contrast to common usage, 'Investment' in GDP does not mean purchases of financial products.
    • Components of the expenditure approach to calculating GDP as presented in the National Income Accounts (U.S.

  • Growth in the United States

    • In 2013, the estimated GDP was $16.6 trillion, which is a quarter of the nominal global GDP.
    • The 1973 oil crisis caused the GDP to fall 3.7%.
    • The GDP fell again in late 1973 to 1975 (3.1%).
    • 1980s: the U.S. share of the world GDP peaked in 1985 with 23.78% of global GDP.
    • The GDP per capita is the ratio of the GDP to the population.