Learn about Gross Domestic Product (GDP)

Gross Domestic Product (GDP) is an economic indicator that represents the market value of all material goods and services produced within a given country (typically one year).Gross Domestic Product should not be confused with the Gross National Product (GDP) which represents the value at market prices of all goods and services generated by the labor sources and property of residents of a country within or beyond that country in one certain period. GDP is one of the key macroeconomic indicators to measure economic growth. The GDP is of two real and nominal types. Real GDP includes final goods and services measured at constant prices. Nominal GDP includes final goods and services measured at current prices.



Calculation of GDP
GDP can be calculated in three ways, which should, in principle, give the same result.They are:

• • Calculation by production
• • Income calculation
• • Calculations according to expenditures.

Calculation by production
"The market value of all final goods and services accounted for over one year."The most direct of the three modes of calculation is the output, which collects the results of each enterprise class to generate the overall score.This method consists of three phases:

• • Calculation of Internal Production Value (VP) from various economic activities;
• • Defining Intermediate Consumption (CN), ie, the cost of materials, supplies and services used to produce the final goods or services
• • Reduction of Gross Domestic Product Consumption to obtain Gross Domestic Product Value.symbolically,Gross Value Added = Production Value - Intermediate Consumption Value.Value of Production = Value of total sales of goods and services + Value of changes in inventory.The Gross Added Value of various economic activities by adding indirect taxes and subtracting subsidies on products yields GDP according to the production method.

Calculation by Revenue
"The total amount of income of individuals living in one country over 1 year."Another way to measure GDP is by calculating total revenue. GDP calculated in this way is called the Gross Domestic Product (ABB).This method measures GDP by collecting company and employee income such as labor wages, capital interests, land leases and property and venture profits.Two adjustments need to be made to get GDP:Indirect taxes less subsidies are added to take from factor cost to market prices.Amortization is added to obtain from the net domestic product of gross domestic product.Total revenue can be divided according to different schemes, leading to different formula for GDP measured by the income method. An ordinary formula is:GDP = Employee Salaries + Gross Operating Income + Mixed Mixed Income + Taxes - Subsidies for production and importsPBB = PP + TBO + ABP + T - SEmployee Salaries (PP) measures the total employee payment for the work done. They include wages and salaries, as well as employers' contributions to social security and other programs.Gross Operating Expenditures (TBO) is a surplus due to the owners of embedded businesses. It is often called profit, though only an average of the total cost is deducted from the estimated gross output.Mixed Crude Income (ABP) is the same measure as TBO, but for unincorporated businesses. This often involves smaller businesses.The amount of PP, TBO and ABP is called the total income factor, but it is the income of all factors of production in society. It measures the value of GDP in factor (base) of prices. The difference between basic prices and final prices (those used in the calculation of expenses) is the total taxes and subsidies that the government has imposed or paid on it production. So adding less taxes on subsidies for production and imports converts GDP into factor cost with ABB.Total income factor is also sometimes expressed as:Total income factor = Employee salary + corporate profits + owner's income + rental income + Net interest.However, another formula for GDP according to revenue method is:PBB = Q + I + F + RS + Pwhere Q: Rents I: F interests: RS profit: statistical adjustments (corporate income taxes, dividends, undistributed corporate profits) P: wages

Estimated cost
"All expenses incurred by individuals over 1 year."In the economy, the most manufactured things are produced for sale, and sold. Hence, measuring the total cost of money used to buy things is a way of measuring output. This is known as the method of calculating GDP expenditures. Note that if you make yourself a sweater, it's production, but not counted as GDP, because it has never been sold. Trick production is a small part of the economy, but if someone counts some major activities such as child growth (generally unpaid) as output, GDP would not be an accurate indicator of output.