Gross domestic product

This subject is about GDP.A region's gross domestic product, or GDP, is one of the ways for measuring the size of its economy. The GDP of a country is defined as the total market value of all final goods and services produced within a country in a given period of time (usually a calendar year). It is also considered the sum of value added at every stage of production (the intermediate stages) of all final goods and services produced within a country in a given period of time. Until the 1992 the term GNP or gross national product was used in the United States. The two terms GDP and GNP are almost identical - and yet entirely different; GDP (or GDI - Gross Domestic Income) being concerned with the region in which income is generated. That is, what is the market value of all the output produced in a nation, the United States, for example, in one year. GDP concerns itself with where the output is produced and not who produced it. Meanwhile, GNP (or GNI - Gross National Income) is a measure of the accrual of income or the value of the output, produced by the "nationals" of a region. GNP concerns itself with who "owns" the production. If we take the USA as an example again, GNP measures the value of output produced by American firms, regardless of where the firms are located. This compares to GDP which is concerned with where the production takes place and not if the company is an American firm or not. Supposing that a firm can be defined as American in an economic world where most large firms are actually global groups.

The most common approach to measuring and understanding GDP is the expenditure method:

GDP = consumption + investment + (government spending) + (exports − imports), or, GDP = C + I + G + (X-M) "Gross" means depreciation of capital stock is not included. With depreciation, with net investment instead of gross investment, it is the net domestic product. Consumption and investment in this equation are the expenditure on final goods and services. The exports minus imports part of the equation (often called cumulative exports) then adjusts this by subtracting the part of this expenditure not produced domestically (the imports), and adding back in domestic area (the exports).

Economists (since Keynes) have preferred to split the general consumption term into two parts; private consumption, and public sector (or government) spending. Two advantages of dividing total consumption this way in theoretical macroeconomics are:

Private consumption is a central concern of welfare economics. The private investment and trade portions of the economy are ultimately directed (in mainstream economic models) to increases in long-term private consumption. If separated from endogenous private consumption, government consumption can be treated as exogenous, so that different government spending levels can be considered within a miraculous piece of a frame