Thursday, August 16, 2007

Simply GDP

Someone asked me about this today, so I thought will post on it too...

What is GDP and how is a country's GDP estimated?

A: A country's Gross Domestic Product (GDP) is nothing but a way of measuring the size of its economy. It can be considered as the market value of all goods and services produced within the country in a given time frame.

The famous GDP equation is as follows -

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

C -> total Consumption in the country (e.g., food)
I -> total Investment in the country (e.g., construction of a new oil field)
G -> total Government spending in the country (e.g., salaries of civil servants)
X -> total eXports
M -> total iMports

And where to get the numbers to plug into this equation? Wish it were that simple, that is a big course by itself, on what to include and what not to include.

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Blogger Raji said...

Thanks for posting the basic concept of GDP. Factors like inflation/deflation affects a country's GDP...Isn't it? But how? If you could explain this with an example, that would be great.

8:37 AM  

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