Gross Domestic Product

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The Gross Domestic Product is the monetary value of final goods and services produced by an economy in a given period of time.

The word gross means that certain values are not calculated; these values are: variation in inventories and capital depreciations or appreciations.

The word domestic indicates production within the geographical boundaries of a given economy and

The word product refers to an added value.

How is the Gross Domestic Product calculated?

Three equivalent theoretical methods are used to calculate GDP: (1) Expenditure Method, (2) Income Method, and (3) Added Value Method.

Expenditure Method

The GDP is the sum of all expenditures made for the acquisition of end product goods or services produced within a given economy; this means that the acquisition of intermediate goods and services is excluded, as are imported goods or services.

Added Value Method

The GDP is the sum of the added values in the different production stages in every sector of the economy. The added value created by a business in the production process is equal to the value of its production minus the value of the intermediate goods.

Income Method

The GDP is the sum of the earnings of salaried employees, profits made by businesses, and taxes minus any grants. The difference between the value of a company’s outputs and the intermediate goods ends up in one of the three following categories: workers; in the form of labor income, businesses; in the form of benefits, or the State; in the form of indirect taxes, such as the VAT (Value Added Tax).

Nominal GDP versus real GDP

It must be kept in mind that production is measured in monetary terms; because of this, inflation can cause the nominal measurement of the GDP to be bigger from one year to the next, while at the same time the real GDP is unchanged. To solve this problem, the real GDP is calculated by deflating the nominal GDP through a price index, or, to be more exact, a GDP deflator is applied. A GDP deflator is a price index that includes every produced good.

To make international comparisons, the GDP can be expressed in US dollars. Since exchange rates tend to be very unstable, this measurement is affected by the exchange rate fluctuations. To solve this problem, economists use another method to conduct international comparisons, which consists of deflating the GDP by using the purchasing power parity (better known as PPP).

Domestic Product versus National Product

In the case of the Gross Domestic Product (GDP), the added value within a country is calculated. In the case of the Gross National Product (GNP), the value added by the nationally owned production factors is calculated.

Gross Product versus Net Product

The difference between the gross product and national product is the depreciation of the capital. Gross Product does not consider the depreciation of the capital, while the Net Product does, in fact, use it for calculating the total.

Product Per Capita

The GDP per capita is the average amount of Gross Product per person. It is calculated by dividing the total GDP by the number of people living in a given economy.

What is wrong with the GDP?

The use of the GDP per capita as a measurement of well being is generalized, but the Gross Domestic product might not be the best way to measure well-being. Here is why:

  • The GDP does not take capital depreciation into account (this includes machinery, factories, etc. as well as natural resources; and “human capital” could also be included). For instance, a country can increase its GDP by intensively exploiting its natural resources, but the countries´ capital will diminish, leaving decreased capital for future generations.
  • It does not consider negative externalities generated by some production activities, for instance: environmental pollution.
  • The distribution of income is not taken into account. The inhabitants of a country with the same per capita GDP as another country but with a more equitable distribution of its income will enjoy an increased level of well being.
  • The GDP does not take into consideration productive activities that affect well being but do not generate transactions, for instance, volunteer work or stay-home parents.
  • Some activities that negatively affect well being can actually increase the GDP, for instance, divorces, crimes and war.
  • The GDP ignores external debt. The GDP of a country will increase if the government or the businesses within its boundaries take on loans from foreign entities. Obviously, this would cause a diminished GDP in future periods.

Gross Domestic Product: Data by Cuntry

Current 2019 US$ Million

countryGDP
1United States21433226
2China14279937
3Japan5081769
4Germany3861123
5India2868929
6United Kingdom2829108
7France2715518
8Italy2003576
9Brazil1839758
10Canada1736425
11Russian Federation1699876
12Korea, Rep.1646739
13Australia1396567
14Spain1393490
15Mexico1268870
16Indonesia1119190
17Netherlands907050
18Saudi Arabia792966
19Turkey761425
20Switzerland703082
21Poland595858
22Thailand543548
23Belgium533097
24Sweden530883
25Nigeria448120
26Argentina445445
27Austria445075
28United Arab Emirates421142
29Norway403336
30Israel394652
31Ireland388698
32Philippines376795
33Singapore372062
34Hong Kong SAR, China365711
35Malaysia364681
36South Africa351431
37Denmark350104
38Colombia323615
39Egypt, Arab Rep.303092
40Bangladesh302571
41Chile282318
42Pakistan278221
43Finland269296
44Vietnam261921
45Czech Republic250680
46Romania250077
47Portugal238785
48Iraq234094
49Peru226848
50Greece209852
51New Zealand206928
52Kazakhstan181665
53Qatar175837
54Algeria171091
55Hungary163469
56Ukraine153781
57Kuwait134628
58Morocco119700
59Ecuador107435
60Slovak Republic105079
61Puerto Rico104988
62Ethiopia95912
63Kenya95503
64Dominican Republic88941
65Angola88815
66Sri Lanka84008
67Guatemala76710
68Oman76331
69Myanmar76085
70Luxembourg71104
71Bulgaria68558
72Ghana66983
73Panama66800
74Tanzania63177
75Belarus63080
76Costa Rica61801
77Croatia60752
78Cote d'Ivoire58539
79Uzbekistan57921
80Uruguay56045
81Lithuania54627
82Slovenia54174
83Macao SAR, China53859
84Libya52091
85Lebanon51991
86Serbia51475
87Congo, Dem. Rep.50400
88Azerbaijan48047
89Jordan44502
90Bolivia40895
91Cameroon39007
92Tunisia38796
93Bahrain38574
94Paraguay38145
95Uganda35165
96Latvia34102
97Estonia31471
98Nepal30641
99Sudan30513
100Cambodia27089
101El Salvador27022
102Honduras25095
103Cyprus24948
104Papua New Guinea24829
105Trinidad and Tobago24269
106Iceland24188
107Senegal23578
108Zambia23309
109Yemen, Rep.22581
110Zimbabwe21440
111Bosnia and Herzegovina20164
112Afghanistan19291
113Botswana18340
114Lao PDR18173
115Georgia17477
116Mali17279
117Gabon16874
118Jamaica16458
119Burkina Faso15990
120Mozambique15291
121Albania15279
122Malta14989
123Benin14390
124Haiti14332
125Madagascar14114
126Mauritius14048
127Mongolia13996
128Armenia13672
129Bahamas, The13578
130Brunei Darussalam13469
131Niger12911
132North Macedonia12547
133Nicaragua12520
134Namibia12366
135Guinea12296
136Congo, Rep.12267
137Moldova11968
138Chad11314
139Equatorial Guinea11026
140Rwanda10354
141Kyrgyz Republic8454
142Tajikistan8116
143Kosovo7926
144Malawi7666
145Mauritania7600
146Bermuda7484
147Maldives5642
148Montenegro5542
149Fiji5496
150Togo5490
151Barbados5209
152Guyana5173
153Somalia4942
154Eswatini4471
155Sierra Leone4121
156Suriname3697
157Djibouti3324
158Andorra3154
159Curacao3101
160Liberia3070
161Burundi3012
162Bhutan2530
163Lesotho2376
164Central African Republic2220
165St. Lucia2122
166Timor-Leste2017
167Cabo Verde1981
168Belize1879
169Gambia, The1826
170Seychelles1703
171Antigua and Barbuda1661
172Solomon Islands1589
173Guinea-Bissau1339
174Grenada1210
175Turks and Caicos Islands1197
176Comoros1165
177St. Kitts and Nevis1053
178Vanuatu934
179Samoa852
180St. Vincent and the Grenadines824
181Dominica582
182Tonga512
183Sao Tome and Principe418
184Palau268
185Kiribati194
186Nauru118
187Tuvalu47

Source: World Bank national accounts data, and OECD National Accounts data files.
https://data.worldbank.org/indicator/NY.GDP.MKTP.CD

GDP at purchaser's prices is the sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products. It is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources. Data are in current U.S. dollars. Dollar figures for GDP are converted from domestic currencies using single year official exchange rates. For a few countries where the official exchange rate does not reflect the rate effectively applied to actual foreign exchange transactions, an alternative conversion factor is used.

Top 10 Countries by Gross Domestic Product

Gross Domestic Product

Source: World Bank 2019

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