29/05/2026
GDP stands for Gross Domestic Product. It is the total monetary value of all final goods and services produced within a country’s borders during a specific time period (usually a year or a quarter).
GDP Formula (Expenditure Method)
The most common way to calculate GDP is:
Where:
* C = Consumer spending (households)
* I = Investment (business spending on capital)
* G = Government spending
* X = Exports
* M = Imports
Types of GDP
1. Nominal GDP – measured using current prices.
2. Real GDP – adjusted for inflation.
3. GDP per capita – GDP divided by population; shows average economic output per person.
Why GDP Matters
GDP is used to:
* Measure a country’s economic performance
* Compare economies over time
* Determine whether an economy is growing or shrinking
* Help governments make economic policies
Example
If a country produces:
* $500 billion in consumer goods,
* $200 billion in investments,
* $150 billion in government services,
* exports worth $100 billion,
* and imports worth $50 billion,
then:
GDP = 500 + 200 + 150 + (100 − 50) = $900 billion
Limitations of GDP
GDP does not measure:
* Income inequality
* Quality of life
* Environmental damage
* Unpaid work (like household labor)
So, a high GDP does not always mean people are happier or better off.
Economics & accounting
