Tuesday, September 9, 2014

Gross Domestic Product (GDP)

Gross Domestic Product (GDP) is the primary economic indicators used to gauge the health of a country's economy over a specific time period, as well as to gauge a country's standard of living, you can think of it as the size of the economy. Usually, GDP is calculated on an quarterly or annual basis. It includes all of the private and public consumption, government outlays, investments and exports less imports that occur within a defined territory. For examples, if compared to the previous calculated GDP and it is up 2%, which mean that the economy has grown by 2%.

GDP = C + G + I + (EXP - IMP)

Here is a description of each GDP component:

C (Consumption) - largest GDP component in the economy, consisting all private consumption, or consumer spending, in a nation's economy
G (Government) - the total of the government spending
I (Investment) - the total of all the country's business spending on capital
EXP (Export) - the nation's total net exports
IMP (Import) - the nation's total net imports

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