Gross Domestic Product
GDP Full Form. The Full form of GDP- Gross Domestic Product. GDP is the total market value of all the goods and services produced within a country in a specific duration of time.GDP per capita does not, however, reflect differences in the cost of living and the inflation rates of the countries; by using a basis of GDP per capita at purchasing power parity is arguably more useful when comparing living standards between the nations, while Nominal GDP is more useful or successful comparing national economies on the international market.
The OECD defines GDP as an aggregate measure of production equal to the sum amount of the gross values added to the all resident and institutional areas engaged in productions & services (plus or minus any taxes, and minus any subsidies, on products must not be included in the value of their outputs).
The ratio of GDP to the total population of the region is the per capita GDP and the same as it known as Mean Standard of Living. GDP is considered as the world's most powerful statistical indicator or instrument of national development and progress.
The OECD defines GDP as an aggregate measure of production equal to the sum amount of the gross values added to the all resident and institutional areas engaged in productions & services (plus or minus any taxes, and minus any subsidies, on products must not be included in the value of their outputs).
The ratio of GDP to the total population of the region is the per capita GDP and the same as it known as Mean Standard of Living. GDP is considered as the world's most powerful statistical indicator or instrument of national development and progress.
History
William P came up with the basic concept or idea of GDP to attack against the landlords from unfair taxation during warfare between the Dutch and the English between 1654 and 1676. Charles Davenant developed the method further in 1695. The modern concept of GDP was first develop by Simon Kuznets for the US Congress report in 1934.
The history of the concept of GDP should be distinguishedfrom the history of changes in ways of measuring it. The value added by firms is particularly easy to calculated the amount from their accounts, but the value added by the public sector, by financial industries & by intangible asset creation is more complex.
Roles Of GDP
• GDP is an important component of macroeconomics that measure the total final goods and services produced in the country within a stated period, usually quarterly
• An assessment of the GDP allow government to measure the state of their nation economies.
• GDP figure are used by investor to assess the state of the economy in a country before before making any investment.
• When GDP rises it seen sharply leading to a period of economic boom which leads to inflation.
• It is used to measure the productivity of labor force, determine how the federal government controls the flow of money and estimate or predict tax revenue for national, state and local government.
What is Per Captia ?
Per capita is a common term used in economics human geography and statistics. Per capita means per person or per head of the population the economic term income per capita or per capita income measures the average income per person in a country region or city in a particular year we calculate it by dividing total GDP by the whole population GDP stands for gross domestic product income per capita does not tell you what people's salaries are in this type of calculation the nation's total income is divided by the whole population a significant proportionof a population does not work such as retired people students and children therefore income per capita is much less than the average annual salary in a country the average annual salary is typically always greater than the income per capita.
Let's look at an example imagine a fictitious country has a population of 10 million people and a GDP of 200 billion 60 percent of that country's population is economically active they are actively earning money here are two calculations we can make regarding their income income per capita and average annual salary let's first look at income per capita we divide the total GDP by the population which gives us a value of 20000 the income per capita is 20,000 however the active population of the country is only 6 million that is there are only 6 million people actively earning money in the country we divide 200 billion by the active population 6 million and we get 33333 as you can see the average annual salary in this country is $13,000 higher than the income per capita per capita cost let's imagine there are 4 people eating together in a restaurant with per capita cost we add the total number of heads or people we then divide the bill by that's number look it's the calculation on the left for people that bills $200 so the per capita cost is $50 that is each person has to pay $50 to cover the bill we also use the term per capita for expenditure usually on a national scale let's imagine that the government spends 500 million in one year on road maintenance and the country's population is 10 million what would expenditure per capita on road maintenance be the expenditure per capita is $50 we get this value by dividing the total expenditure on road maintenance by the country's population.
Let's look at an example imagine a fictitious country has a population of 10 million people and a GDP of 200 billion 60 percent of that country's population is economically active they are actively earning money here are two calculations we can make regarding their income income per capita and average annual salary let's first look at income per capita we divide the total GDP by the population which gives us a value of 20000 the income per capita is 20,000 however the active population of the country is only 6 million that is there are only 6 million people actively earning money in the country we divide 200 billion by the active population 6 million and we get 33333 as you can see the average annual salary in this country is $13,000 higher than the income per capita per capita cost let's imagine there are 4 people eating together in a restaurant with per capita cost we add the total number of heads or people we then divide the bill by that's number look it's the calculation on the left for people that bills $200 so the per capita cost is $50 that is each person has to pay $50 to cover the bill we also use the term per capita for expenditure usually on a national scale let's imagine that the government spends 500 million in one year on road maintenance and the country's population is 10 million what would expenditure per capita on road maintenance be the expenditure per capita is $50 we get this value by dividing the total expenditure on road maintenance by the country's population.
Formula
GDP = C + I + G + (x - m) ;
Whereas;
• C : Consumer Spending
• I : Investment
• G : Government Spending
• X : Exports
• M : Imports
