Gross domestic product (GDP),
Definition of Gross domestic product (GDP):
Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country’s economic health.
The value of a countrys overall output of goods and services (typically during one fiscal year) at market prices, excluding net income from abroad.
Gross Domestic Product (GDP) can be estimated in three ways which, in theory, should yield identical figures. They are
(1) Expenditure basis: how much money was spent,
(2) Output basis: how many goods and services were sold, and
(3) Income basis: how much income (profit) was earned.
These estimates, published quarterly, are constantly revised to approach greater accuracy. The most closely watched data is the period to period change in output and consumption, in real (inflation adjusted) terms. If indirect taxes are deducted from the market prices and subsidies are added, it is called GDP at factor cost or national dividend. If depreciation of the national capital stock is deducted from the GDP, it is called net domestic product. If income from abroad is added, it is called gross national product (GNP). The main criticisms of GDP as a realistic guide to a nations well-being are that
(1) it is preoccupied with indiscriminate production and consumption, and
(2) it includes the cost of damage caused by pollution as a positive factor in its calculations, while excluding the lost value of depleted natural resources and unpaid costs of environmental harm.
For further explanation, see GDP vs. GNP – Whats the Difference? at InvestorWords.com.
Though GDP is typically calculated on an annual basis, it is sometimes calculated on a quarterly basis as well. In the U.S., for example, the government releases an annualized GDP estimate for each fiscal quarter and also for the calendar year. The individual data sets included in this report are given in real terms, so the data is adjusted for price changes and is, therefore, net of inflation. In the U.S., the Bureau of Economic Analysis (BEA) calculates the GDP using data ascertained through surveys of retailers, manufacturers, and builders, and by looking at trade flows.
How to use Gross domestic product (GDP) in a sentence?
- The increase in the developing nations gross domestic product last year encouraged foreign investors to continue assisting in the buildup of infrastructure.
- Gross Domestic Product (GDP) is the monetary value of all finished goods and services made within a country during a specific period.
- GDP can be calculated in three ways, using expenditures, production, or incomes. It can be adjusted for inflation and population to provide deeper insights.
- The American economy started to suffer once the gross domestic product dropped below the amount of imports coming into the country.
- Though it has limitations, GDP is a key tool to guide policymakers, investors, and businesses in strategic decision making.
- GDP provides an economic snapshot of a country, used to estimate the size of an economy and growth rate.
- The finance ministers were under a lot of pressure to improve the countrys economic situation and, for that reason, they focused on their nations gross domestic product and how they could improve it.
Meaning of Gross domestic product (GDP) & Gross domestic product (GDP) Definition