It is an economic wealth indicator that stands
for the total (gross means total) economic value of the final goods and
services produced in a country in a well defined time period (generally a
year). Sometimes the GDP is also expressed as a percentage which indicates the
percentage growth or decline in the financial economy as compared to the
previous defined time period (usually a year). GDP can be calculated in
numerous ways which are logically identical.
1) Income method: here the total value of all
goods and services earned within a country are summed up.
2) Expenditure method: in this method, the total value of all final goods and services spent by the consumer, investment and government are summed up.
3) In this method the value of the total goods and capital sold are summed up.
the formula to calculate GDP is:
o GDP = C + G + I + NX
Where:
o C = All private consumption
o G = All government spending
o I = Investment by businesses
NX = The country’s net exports (total exports – total imports)
GDP is highly essential because GDP per capita is often considered an indicator of a country's standard of living, or in other words, the GDP is an indicator of the country’s economy . a declining GDP warns the business men and the federal government to build up policies to prevent inflation, which is a major threat to the economy.
But THE GDP is even condemned upon its inefficiency to account for the real world living conditions. It is said to reflect only the wealth expansion (economic growth) of the country or the capital consumption only. Sometimes a thing may contribute nothing to the well-being of individuals but still the government takes it into account in the GDP calculation.
2) Expenditure method: in this method, the total value of all final goods and services spent by the consumer, investment and government are summed up.
3) In this method the value of the total goods and capital sold are summed up.
the formula to calculate GDP is:
o GDP = C + G + I + NX
Where:
o C = All private consumption
o G = All government spending
o I = Investment by businesses
NX = The country’s net exports (total exports – total imports)
GDP is highly essential because GDP per capita is often considered an indicator of a country's standard of living, or in other words, the GDP is an indicator of the country’s economy . a declining GDP warns the business men and the federal government to build up policies to prevent inflation, which is a major threat to the economy.
But THE GDP is even condemned upon its inefficiency to account for the real world living conditions. It is said to reflect only the wealth expansion (economic growth) of the country or the capital consumption only. Sometimes a thing may contribute nothing to the well-being of individuals but still the government takes it into account in the GDP calculation.
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