Table of Contents
Gross Domestic Product (GDP)
GDP is the total amount of goods and services produced in a country, which includes goods and services exported.
More formally:
GDP is calculated by adding together:
- Personal and public consumption
- Public and private investment
- Government spending
- Exports minus imports
Remarks
The definition of GDP is imperfect, as is the estimate.
- If a person is not rewarded for work that they did, e.g.stay at home parents, volunteer workers, that work will not be included in GDP.
- All government spending is included, e.g. military spending. Governments that spent excessive amounts will have a larger GDP, without much benefit to its citizens.
- It does not measure quality of life. More and more sociologists (and economists) are interested in what is the benefit that is derived from a country's GDP.
- It is an average. Some people in the country might be doing extremely well, while simultaneously others might be doing extremely poor. Insight into this situation is provided by the Gini Coefficient.
Investopedia - GDP