GDPis the acronym for Gross Domestic Product, which, broadly speaking, is a economic indicator widely used in Macroeconomics (branch of Economic Sciences) which presents the sum of all goods and services produced in a geographic area in a given period (it can be a year or a quarter). Thus, the GDP represents the economic dynamics of the place, pointing to the possible growth of the economy.
Read more:What is per capita income?
What is GDP for?
Basically, GDP serves to measure economic activity, having as an analysis the result of economic growth in the place in question. When calculating the GDP, it is not only created the possibility of analyze economic growth, but also provides opportunities for comparisons with other locations. This level of growth can also indicate possible problems (if it has not grown as expected) and, thus, allow diagnoses that point out ways to improve the economy.
The GDP also makes it possible to analyze which sectors of the economy generate more or less income. Therefore, it is possible identify economic weaknesses, as well as seeing which sectors should be invested.
knowalso:What is GNP?
How to calculate GDP?
O GDP calculation considers final goods and services, which means that the iron used in the production of a car, for example, is not taken into account, but the car itself. This prevents some products from being counted twice. The measurement of the level of wealth can be done in three ways (reaching the same result):
Wealth: All the wealth produced in the area is added. Thus, everything that was produced is considered. This sum takes into account what was produced by industry, the service sector (all remunerated activities) and agriculture. are disregarded, in this case, the intermediate products, that is, the raw materials, so as not to count them twice.
Demand: Consumption is considered, that is, internal expenditure is taken into account, so there is an analysis of what is consumed by families and the government, as well as expenses of companies (private or government) that invest. Exports and imports are also considered in this calculation. The sum is made from everything that is purchased.
Income: Compensation based on salaries, interest, rents and distributed profits are added up. In this case, it is considered that the salary can pay for the food sold in the restaurant, for example, and, thus, you also pay for the service, guaranteeing the profit obtained by the establishment, as well as the costs of the production.
The calculation of GDP is based on the sum of goods produced during a given time in a given place.
In short:
The following are considered in the calculation: |
Not considered in the calculation: |
Final goods and products (sold to the final consumer); |
Intermediate goods (products used in the production of a final product, that is, raw materials); |
Services (paid activities); |
Unpaid services; |
Investments (expenses by private companies or government with the aim of increasing production); |
Goods that already exist (a house is only taken into account when built. When it is resold, it is not included in the calculation); |
Government spending (what is spent to meet population demands). |
Informal activities. |
knowalso:Difference between export and import
What is the difference between nominal GDP and real GDP?
O nominal GDP corresponds to the one whose calculation is made based on the current prices, therefore, in the year in which the final product was produced and marketed. Nominal GDP consider that there is variationsUSprices through inflation or deflation.
already the real GDP corresponds to the one whose calculation is made based on the constant prices, then choosing a specific year and not taking into account the effect of inflation. Therefore, the real GDP is the moreused by economists, because when choosing a specific year, the production is calculated without much variation.
What is GDP per capita?
GDP per capita or GDP per person is the indicator that represents what every person in the place analyzed would have the total wealth that are produced in the country. Thus, GDP is divided by the number of inhabitants in the area, indicating what each person produced. GDP per capita is considered, in a way, an indicator of the standard of living.
It is important to say that if a country or a particular place has a high GDP, but it has many inhabitants, the GDP per capita will be low, but this does not always mean that the country has a poor quality of life. The same is true for countries with an average GDP such as Norway. As it is not a very populous country, the GDP per capita ends up being high.
It is worth noting that countries with high GDP per capita tend to have higher Development Indices Human, as income growth is proportional to quality.is due. However, many scholars prefer not to use GDP as a determinant of quality of life, as it does not take into account the unequal distribution of income.
Lookalso:Difference between GDP and GNP
What does GDP growth mean?
GDP growth is related to economy rise.The higher the GDP, the higher the income of a given place, so sometimes GDP is related to the quality of life. And if an economy grows, so does the supply of work, as there was an increase in demand to be met.
So we can say that growth is directly related to job creation, as well as the increase in the number of companies and possible investments. The increase in companies and the generation of jobs result in an increase in the supply of products and services, which contributes to controlling inflation.
It is noteworthy that the GDP is related to the economic development level, but not with the development of a particular location as a whole, as it does not take into account issues such as income distribution or social issues such as investments in the health sector or education.
Another important issue addressed by Brazilian Institute of Geography and Statistics, the agency responsible for calculating the GDP in Brazil, is that the GDP is the total wealth of a given place. O GDP is not a stock of money, but rather the economic activity indicator that demonstrates what was produced. If the place in question doesn't produce anything in a year, its GDP will be zero.
The world's largest economies according to GDP
See the list of countries with the highest (real) GDPs in the world, according to the International Relations Research Institute. Data are in accordance with the International Monetary Fund (2016):
1st: United States - US$ 18,569.10 billion
2nd: China - US$ 11,218.28 billion
3rd: Japan - US$4,938.64
4: Germany - US$3,466.64 billion
5: United Kingdom - US$2,629.19 billion
6: France - US$2,463.22 billion
7: India – US$ 2,256.40 billion
8: Italy – US$ 1,850.74 billion
9: Brazil - US$ 1,798.62 billion
10th: Canada - US$ 1,529.22 billion
by Rafaela Sousa
Graduated in Geography
Source: Brazil School - https://brasilescola.uol.com.br/o-que-e/geografia/o-que-e-pib.htm
