1, Calculate
GDP—the abbreviation of Gross Domestic Product —represents the monetary value of all goods and services produced by an economy in a year.
Gross Domestic Product (GDP) is important because it is widely used to measure the output or production of an economy.
is calculated monthly, quarterly or annually.
Formula or equation for calculating GDP: GDP = c + i + g + (x-m) because c refers to consumption, i refers to investment, g refers to government investment and expenditure, x refers to input, m refers to import.
so it can be written as GDP = private consumption + total investment + government investment + government expenditure + (export-import).
2, GDP\GNP
Economists use many abbreviations. The most common of these is GDP, which is often cited by newspapers, television news, and reports from governments, central bank and business groups. It has been widely used as a reference point for national economic health.
GDP measures the monetary value of the final products and services (i.e. products purchased by end users) that a country produces within a given time (such as a quarter or a year). It calculates all outputs generated within a country.
Gross Domestic Product is composed of goods and services sold on the market, and also includes some non-market production, such as defense or education services provided by the government. Another concept, gross national product (GNP), calculates all outputs of a country's residents. So if a German company has a factory in China, the output of that factory will be included in China's gross domestic product (GDP) but also in Germany's GNP.
3. Second-hand houses are not counted as GDP
Not all production activities are included in GDP. For example, black markets or unpaid work (such as work done at home or by volunteers) are not included because they are difficult to accurately measure and value. For example, this means that a baker makes a loaf of bread for a customer will contribute to GDP, but if he bakes the same loaf for his family, he will not contribute to GDP (although the ingredients he buys will be counted).
In addition, GDP measures the latest output, for example, measuring this year's GDP, then the production last year or the previous year does not count, such as buying and selling second-hand houses is not counted in GDP.
4, three angles
Theoretically speaking, GDP can be viewed from three different angles:.
production method : adds up the "added value" of each stage of production, where the definition of added value is the value of total sales minus the intermediate investment in the production process. For example, flour is the intermediate input, bread is the final product; or the architect's service is the intermediate input, and architecture is the final product.
expenditure method : adds up the purchase value of end users, such as household consumption of food, television and medical services; company investment in machines; governments and foreigners purchase goods and services.
revenue method : production revenue is added up—for example, the compensation received by employees and the company's operating surplus (roughly sales minus costs).
5, Prosperity and Recession
When real GDP grows strongly, employment may increase because businesses will hire more workers and people will have more money in their pockets. When GDP shrinks, employment rates tend to drop, as in many countries during the global economic crisis.
In some cases, GDP may be growing, but the growth rate is not enough to create a sufficient number of jobs for job seekers. Real GDP growth does change periodically over time. Economies are sometimes in a period of prosperity, sometimes in a period of slow growth or even recession (recession is often defined as a period of two consecutive quarters of decline in output).
China's GDP
6, what did GDP forgot to tell us?
Understanding GDP cannot tell us anything is also important. GDP is not a measure of a country's overall living standard or well-being. Although changes in goods and services per capita ( GDP per capita) are often used to measure whether the status of ordinary citizens in a country is good or bad, it does not capture what may be considered important for overall well-being.
For example, the increase in yield may come at the expense of other external costs such as environmental damage or health. Or it may involve reduced leisure time or consumption of non-renewable natural resources. The quality of life may also depend on the distribution of a country's GDP among its residents, not just the overall level. To explain these factors, UN calculates the Human Development Index, which is based not only on per capita GDP, but also on other factors such as life expectancy and enrollment.
other attempts to explain some of the shortcomings of GDP, such as the "real progress indicator" and the " Gross National Happiness Index", but some criticize them.
