GDP full form|Definition, Meaning, Uses, Calculation

GDP full form

Gross domestic product

The GDP full form is Gross Domestic Product. It is a measure of the total value of all the goods and services produced by a country in a particular year. The GDP calculation takes into account the expenditure of the residents of a country on final goods and services. It also includes the income earned by foreigners within the boundaries of the country and excludes the income of foreigners from outside the country. The GDP calculation is done on an annual basis.

Understanding Gross Domestic Product (GDP)

The GDP is the total market value of all final goods and services produced within a country in a particular year. It is calculated by summing up the expenditure of all residents on final goods and services. It also includes the income earned by foreigners within the boundaries of that country but excludes income from foreign sources outside it.

Let us take a closer look at each component of GDP.

Private Consumption Expenditure: This refers to the total expenditure on goods and services by individuals. This has two components i.e. consumer spending and durable goods spending.

Consumer Spending: It includes expenses made by consumers for the purchase of items such as food, tobacco, clothing, toys, transportation, entertainment, etc.

Durable goods spending: Items bought by consumers for regular use, i.e. not meant only for the momentary satisfaction of needs but to serve over a period of time are called durable goods. These items include household appliances like refrigerators, furniture, carpets, etc.

Investment Expenditure: This includes the total spending on buying new capital assets. These can be long-term or short-term capital assets. Long-term assets include items that are used for a period of more than one year such as residential buildings, roads, etc while short-term assets refer to those which can be used up in a year such as jewelry and construction of new commercial complexes.

Government Expenditure: This is the total spending by the government on final goods and services. It includes salaries of civil servants, the construction cost of new roads, national defense spending, etc. Foreign Trade Balance: As a result of imports and exports both countries can gain or lose from international trade. If a country’s imports are greater than its exports then it is said to have a negative balance of trade. On other hand, if its exports are higher than its imports then it would have a positive balance of trade. The difference between these two values gives rise to this component in GDP calculation.

GDP = C + I + G + (X-M)

Where C refers to private consumption expenditure, I is investment expenditure, G is Government expenditure, and (X-M) is the foreign trade balance.

The GDP growth rate is the percentage by which the GDP of a country increases or decreases in one year. It can be calculated by checking the difference between the current and previous year’s values of GDP and dividing it by the previous year’s value. For instance, if a country’s GDP for 2010 was $10 billion and that for 2011 was $11 billion then we would simply calculate:

GDP Growth Rate = [(2011 — 2010)/2010]

= [1/1][100%] = 100%

Similarly, if the value comes out to be negative then it indicates a fall in production from last year. Similarly, if it is positive it means an increase in production.

GDP = C + I + G + (X-M)

Where C refers to Private consumption expenditure, I is investment expenditure, G is Government expenditure, and (X-M) is the foreign trade balance.

The GDP growth rate also helps measure the economic welfare of a nation in terms of real incomes earned by its citizens. For example, if the GDP growth rate for a certain year was 5% then it would mean that there has been increasing in income earned by citizens by 5%.

History of GDP

The history of GDP begins with the calculation made for the US and UK governments during World War 2. The aim was to estimate how much it would cost to wage war and what taxes were needed to pay for it. One problem that arose is that money spent on armaments had a negative effect on economic activity, because factories were switched from producing consumer goods to making tanks and bombs. To circumvent this issue, economists decided GDP should be calculated as:

GDP = private consumption + gross investment + government spending + (exports – imports)

This is known as the expenditure approach since all expenditures contribute equally towards increasing GDP. It is also known as the Keynesian approach after British economist John Maynard Keynes who proposed it in a 1936 paper.

The first GDP estimates were released in the US and the UK in 1941. They calculated that $66.4bn was spent by the Allied forces during the war, of which $31.5bn came from the US and $8.8bn from the UK. The cost of the war was equivalent to a little over a quarter of America’s GDP at the time. This led governments to undertake new forms of taxation and borrowing to pay for the war effort.

Where does GDP data come from??

Data for calculating GDP is collected from various organizations and institutions. The Bureau of Economic Analysis (BEA), the Bureau of Labor Statistics (BLS) and the Census Bureau are just a few of the organizations that provide data to measure GDP.

Allocation of Gross Domestic Product

The components that make up the GDP should be allocated a proportion based on how much they contribute towards increasing it. It should be proportional to what each component has been assigned by the BEA’s GDP formula.

What is the purpose of GDP full form??

Gross domestic product (GDP) is the total value of goods and services that are produced within a country. GDP sets out what proportion of this wealth is due to production by households, non-profit institutions, government enterprises, and private sector companies.

So if the Gross Domestic Product for Country X were to be USD4 trillion in 2015 then approx 33% would be due to the household sector, another 17% would be related to non-profits or government-owned entities while another 50% or 1.5 trillion would be generated by privately held businesses around the world.

Note: Private sector does not mean profit-related but rather it covers all types of businesses including nonprofits.

GDP full form IN HINDI

ग्रॉस डॉमेस्टिक प्रोडक्ट या सकल घरेलू उत्पाद

What is the full form of GDP?

Gross domestic product

What is GDP and how is it calculated?

GDP is defined by the following formula: GDP = Consumption + Investment + Government Spending + Net Exports or more succinctly as GDP = C + I + G + NX

Which Country Has the Highest GDP?

The countries with the two highest GDPs in the world are the United States and China.

GDP full form in Hindi

ग्रॉस डॉमेस्टिक प्रोडक्ट या सकल घरेलू उत्पाद

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