Gross Domestic Product (GDP)

What is Gross Domestic Product (GDP)?

Gross Domestic Product (GDP) is a key economic indicator that measures the total value of goods and services provided in a country during a specific period of time. It gives insight into the overall health of an economy and helps policymakers understand how to most effectively use resources to meet their goals. GDP acts as a guide that sheds light on issues such as poverty, income inequality, and unemployment levels.

How GDP is calculated?

To calculate GDP, economists use two approaches: The Expenditure Approach and the Income Approach. The former measures the aggregate expenditure on final goods and services, while the latter measures total income earned from production activity less capital depreciation in an interval of time. Both these approaches help to assess the progress and strength of an economy since they provide insights into various tangible economic outputs.

Why is GDP important?

Gross Domestic Product (GDP) is a critical economic concept, providing an important measure of economic activity and performance. GDP can provide insight into the overall economy, empowering decision-makers to better understand their country’s macroeconomic context. Countries use GDP as a barometer of economic health, allowing them to compare their performance over time to other countries. GDP also influences public policy and foreign investment decisions.