GDP Full Form, What is the Full form of GDP? | GDP Full Form is Gross Domestic Product

GDP Full Form, What is the Full form of GDP? | What does GDP mean? | What means by GDP?

The Full form of GDP is Gross Domestic Product. GDP is the total market value of all the goods and services produced within a country for a specific duration of time. GDP measures the monetary value of final goods and services – that is, those that are bought by the final user – produced in a country in a given period of time. It is used to measure the size of an economy and the overall growth or decline in the economy of a nation. It indicates the economic health of a country as well as specifies the living standard of the people of a specific country, i.e. as the GDP increases the living standard of the people of that country increases. A country having good GDP is considered a good country for living purposes. In India, there are three main sectors that contribute to GDP; industry, service sector, and agriculture including allied services. GDP is the primary indicator to determine the growth of a country’s economy. There are many approaches to calculating GDP. If we talk about a simple approach, it is equal to the total of private consumption, gross investment, and government spending plus the value of exports, minus imports i.e. the formula to calculate GDP = private consumption + gross investment + government spending + (exports – imports).

What is GDP in economics and why is it so Important to Economists and Investors?

It represents the total dollar value of all goods and services produced over a specific time period, often referred to as the size of the economy. GDP is usually expressed as a comparison to the previous quarter or year.

KEY TAKEAWAYS

• The gross domestic product tracks the health of a country's economy.
• It represents the value of all goods and services produced over a specific time period within a country's borders.
• Economists can use GDP to determine whether an economy is growing or experiencing a recession.
• Investors can use GDP to make investment decisions—a bad economy means lower earnings and lower stock prices.

How is GDP Calculated?

Though GDP is usually calculated on an annual basis, it can be calculated on a quarterly basis as well. In the United States, for example, the government releases an annualized GDP estimate for each quarter and also for an entire year. Most of the individual data sets will also be given in real terms, meaning that the data is adjusted for price changes, and is, therefore, net of inflation.

See also:

• Full form of IAS
• Full form of GFA
• Full form of ABS
• Full form of CTR
• Full form of FIFA

What is the GDP formula?

There are two primary methods or formulas by which GDP can be determined:

#1 Expenditure Approach

The most commonly used GDP formula, which is based on the money spent by various groups that participate in the economy.

GDP = C + G + I + NX

C = consumption or all private consumer spending within a country’s economy, including, durable goods (items with a lifespan greater than three years), non-durable goods (food & clothing), and services.

G = total government expenditures, including salaries of government employees, road construction/repair, public schools, and military expenditure.

I = the sum of a country’s investments spent on capital equipment, inventories, and housing.

NX = net exports or a country’s total exports less total imports.

#2 Income Approach

This GDP formula takes the total income generated by the goods and services produced.

GDP = Total National Income + Sales Taxes + Depreciation + Net Foreign Factor Income

Total National Income – the sum of all wages, rent, interest, and profits.

Sales Taxes – consumer taxes imposed by the government on the sales of goods and services.

Depreciation – cost allocated to a tangible asset over its useful life.

Net Foreign Factor Income – the difference between the total income that a country’s citizens and companies generate in foreign countries, versus the total income foreign citizens and companies generate in that country.

What are the Types of GDP?

GPD can be measured in several different ways.  The most common methods include:

• Nominal GDP – the total value of all goods and services produced at current market prices. This includes all the changes in market prices during the current year due to inflation or deflation.
• Real GDP – the sum of all goods and services produced at constant prices. The prices used in determining the Gross Domestic Product are based on a certain base year or the previous year. This provides a more accurate account of economic growth, as it is already an inflation-adjusted measurement, meaning the effects of inflation are taken out.
• Actual GDP – real-time measurement of all outputs at any interval or any given time. It demonstrates the existing state of business of the economy.
• Potential GDP – ideal economic condition with 100% employment across all sectors, steady currency, and stable product prices.

Is high or low GDP better?
High or rising GDP Rising means the economy is increasing, this also means more jobs will be available, salaries will rise, the standard of living gets better and buying capacity increases. 

Low or falling GDP means the economy is shrinking, businesses will face a crunch, people see salary cuts, and buying power is reduced.

If GDP continues a downfall for 2 quarters in a row, this indicates a sign of a recession, starting with salary freezes and job losses. GDP is a more accurate measure of a healthy or poor economy of a country.

Top 5 countries with high GDP as published by World Bank in 2017

1. United States - USD 19.485 Trillion - 2.27% growth
2. China - USD 12.238 Trillion - 6.90% growth
3. Japan - USD 4.872 Trillion - 1.71% growth
4. Germany - USD 3.693 Trillion - 2.22% growth
5. India - USD 2.651 Trillion - 6.68% growth