The Gross Domestic Product is known as GDP.
Gross Domestic Product is a concept also known as GDP that is used in the field of macroeconomics to name the value that totals the production of goods and services of a country in a certain period.
Typically, GDP is taken as the basic indicator to reflect the wealth of a region.
Calculation of Gross Domestic Product
Although it is difficult to calculate because there are many variables in this regard, we can say that the Gross Domestic Product of a country is obtained based on the following formula:
GDP = C + I + G + X – M
In that mentioned formula these are the terms that appear:
- C is consumption.
- I is the set of income associated with the nation in question.
- G is the public spending that exists in that place.
- X is the number of exports produced in the country.
- M indicates the set of imports carried out in the state.
Various variables are considered to calculate the Gross Domestic Product.
Classification according to type
To work with homogeneous data, all GDP variables are calculated in a monetary unit (such as the dollar , for example).
Taking this into account, a distinction can be made between real GDP (which takes the value according to constant prices, calculating inflation ) and nominal GDP (calculated with the prices in force in the year in question). This means that a country can show a large growth in nominal GDP if it has inflation, without this implying an increase in wealth.
Variables not included in the Gross Domestic Product
Despite the importance of calculating GDP, there are many economic variables that are not part of its composition. Figures from the informal or black economy , environmental impact (with its economic consequences) and production for own consumption (with products that do not reach the market ), among other issues, are not included in the GDP estimate but are relevant in the economic life of a nation.
Furthermore, the aforementioned GDP cannot be concluded to accurately determine the wealth of a country, since it does not take into account voluntary action, which is a service carried out without receiving any type of financial compensation for it, or even assets and liabilities, whether public or private.
In Europe , for example, based on calculations carried out by the World Bank, we could establish that the countries that usually have the highest Gross Domestic Product are Germany , France and the United Kingdom .
In today's society, in addition to the GDP indicator we are analyzing, there are many others that are used to measure different aspects of society. Specifically, these include the Human Development Index (HDI) or the so-called Green GDP .