What is Gross Domestic Product?
- A country’s gross domestic product (GDP) is the total value of all ‘final’ goods and services, that were produced within the borders of the country, during a year.
- Gross domestic product
The equation used to calculate a nation’s gross domestic product is:
GDP =
consumption + gross investment + government spending + (exports − imports)
Gross domestic product is a good measure of the size or strength of an economy. You can use the GDP figures of two countries to compare the sizes of their economies.
Growing or Shrinking Economy?
GDP is the market value of all the output produced in a country during one year. It is the sum of the value added at every stage of production, by all the industries in a country, during a year.
This means GDP figures can be used to determine if a country’s economy is growing or shrinking.
If a country’s economy is growing, it’s total economic output will become more. In other words, the country’s GDP will increase.
If a country’s economy is shrinking, e.g. during a recession, it’s total economic output will become less. In other words, the country’s GDP will decrease.
This definition is part of the Dictionary of Financial Terms. If you want to receive a notice every time a new definition is published, you can subscribe to Liberta.
June 26th, 2010 at 01:35 am
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