Gross Domestic Product (GDP) is a measure of the total value of goods and services produced in a country over a specific period of time. It’s calculated using the following methods:
- Expenditure method: GDP = C + I + G + NX, where C is consumption, I is investment, G is government spending, and NX is net exports.
- Income method: GDP is calculated by adding together the following:
- Gross profit of companies and self-employed
- Wages of employees
- Product taxes
- Subtracting product subsidies
- Production method: GDP can also be calculated using the production method.
GDP can be measured in different ways, including:
- Nominal GDP: The total value of all goods and services produced at current market prices. This includes the effects of inflation or deflation.
- Real GDP: A more accurate measure of the sum of all goods and services produced at constant prices. This is inflation-adjusted.
- Actual GDP: A real-time measurement of all outputs at any given time.
