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 2020 US$ Million

countryGDP
1United States20936600
2China14722730
3Germany3806060
4United Kingdom2707743
5India2622983
6France2603004
7Italy1886445
8Canada1643407
9Korea, Rep.1630525
10Russian Federation1483497
11Brazil1444733
12Australia1330900
13Spain1281199
14Mexico1076163
15Indonesia1058423
16Netherlands912242
17Switzerland747968
18Turkey720101
19Saudi Arabia700117
20Poland594164
21Sweden537609
22Belgium515332
23Thailand501794
24Nigeria432293
25Austria428965
26Ireland418621
27Israel401953
28Argentina383066
29Egypt, Arab Rep.363069
30Norway362008
31Philippines361489
32Denmark355184
33Hong Kong SAR, China346585
34Singapore339998
35Malaysia336664
36Bangladesh324239
37South Africa301923
38Colombia271346
39Finland271233
40Vietnam271158
41Pakistan263686
42Chile252940
43Romania248715
44Czech Republic243530
45Portugal231255
46New Zealand212482
47Peru202014
48Iran, Islamic Rep.191718
49Greece189410
50Kazakhstan169835
51Iraq167224
52Ukraine155582
53Hungary155012
54Qatar146373
55Algeria145163
56Morocco112870
57Ethiopia107645
58Slovak Republic104574
59Puerto Rico103138
60Kenya98842
61Ecuador98808
62Sri Lanka80706
63Dominican Republic78844
64Guatemala77604
65Myanmar76185
66Luxembourg73263
67Ghana72354
68Bulgaria69105
69Tanzania62409
70Angola62306
71Costa Rica61520
72Cote d'Ivoire61348
73Belarus60258
74Uzbekistan57707
75Croatia55966
76Lithuania55887
77Uruguay53628
78Serbia52960
79Panama52938
80Slovenia52880
81Congo, Dem. Rep.49868
82Jordan43697
83Azerbaijan42607
84Cameroon39802
85Tunisia39235
86Uganda37372
87Bolivia36688
88Paraguay35304
89Nepal33657
90Latvia33505
91Lebanon33383
92Estonia31029
93Sudan26110
94Libya25418
95Cambodia25291
96Senegal24910
97El Salvador24638
98Honduras23827
99Cyprus23804
100Papua New Guinea23591
101Iceland21714
102Trinidad and Tobago21529
103Afghanistan19807
104Bosnia and Herzegovina19788
105Zambia19320
106Lao PDR19136
107Mali17393
108Burkina Faso17369
109Zimbabwe16768
110Georgia15891
111Botswana15781
112Guinea15681
113Benin15651
114Gabon15593
115West Bank and Gaza15561
116Albania14799
117Malta14647
118Mozambique14021
119Jamaica13812
120Madagascar13720
121Niger13678
122Haiti13417
123Mongolia13137
124Armenia12645
125Nicaragua12621
126North Macedonia12266
127Brunei Darussalam12016
128Malawi11961
129Moldova11914
130Bahamas, The11250
131Mauritius10914
132Congo, Rep.10884
133Namibia10699
134Rwanda10333
135Chad10093
136Equatorial Guinea10021
137Tajikistan8194
138Mauritania7778
139Kyrgyz Republic7735
140Kosovo7611
141Togo7574
142Guyana5471
143Somalia4917
144Montenegro4778
145Fiji4376
146Barbados4365
147Maldives4030
148Eswatini3962
149Sierra Leone3865
150Suriname3807
151Djibouti3384
152Burundi3258
153Liberia2950
154Bhutan2409
155Central African Republic2303
156Gambia, The1901
157Lesotho1844
158Timor-Leste1821
159Belize1763
160Cabo Verde1703
161St. Lucia1703
162Solomon Islands1551
163Guinea-Bissau1431
164Antigua and Barbuda1415
165Comoros1219
166Seychelles1124
167Grenada1089
168St. Kitts and Nevis927
169Turks and Caicos Islands924
170Vanuatu854
171St. Vincent and the Grenadines809
172Samoa807
173Sao Tome and Principe472
174Dominica469
175Kiribati199
176Tuvalu48

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 2020

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