Cobra Arbok
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So why isn't it as commonly used as gdp per capita or hdI? Also this "measure" is nothing new. it has been around for a while but still is not used as much.Yes, that's rights.
What are the Types of GDP?
GPD can be measured in several different ways. The most common methods include:
What is included in GDP?
- Nominal GDP – the total value of all goods and services produced at current market prices. This includes all the changes in market prices during the current year due to inflation or deflation.
- Real GDP – the sum of all goods and services produced at constant prices. The prices used in determining the Gross Domestic Product are based on a certain base year or the previous year. This provides a more accurate account of economic growth, as it is already an inflation-adjusted measurement, meaning the effects of inflation are taken out.
- Actual GDP – real-time measurement of all outputs at any interval or any given time. It demonstrates the existing state of business of the economy.
- Potential GDP – ideal economic condition with 100% employment across all sectors, steady currency, and stable product prices.
Gross Domestic Product (GDP) is the monetary value, in local currency, of all final economic goods and services produced in a country during a specific period of time. It is the broadest financial measurement of a nation’s total economic activity. The total goods and services bought by consumers encompasses all private expenditures, government spending, investments, and exports but excludes imports that take place within a designated country. Below are three different approaches to the GDP formula.
#1 Expenditure Approach
The most commonly used GDP formula, which is based on the money spent by various groups that participate in the economy.
GDP = C + G + I + NX
C = consumption or all private consumer spending within a country’s economy, including, durable goods (items with a lifespan greater than three years), non-durable goods (food & clothing), and services.
G = total government expenditures, including, salaries of government employees, road construction/repair, public schools, and military machines.
I = sum of a country’s investments spent on capital equipment, inventories, and housing.
NX = net exports or a country’s total exports less total imports.
#2 Income Approach
This GDP formula takes the total income generated by the goods and services produced.
GDP = Total National Income + Sales Taxes + Depreciation + Net Foreign Factor Income
Total National Income – the sum of all wages, rent, interest, and profits.
Sales Taxes – consumer tax imposed by the government on the sales of goods and services.
Depreciation – cost allocated to a tangible asset over its useful life.
Net Foreign Factor Income – the difference between the total income that a country’s citizens and companies generate in foreign countries, versus the total income foreign citizens and companies generate in that country.
#3 Production or Value-Added Approach
The sum of the value added to a product during the production process. To determine the value added between businesses, the price at which the product is sold by the seller is deducted from the price it was bought for from the supplier.
GDP PER CAPITA
A country’s Gross Domestic Product (GDP) per person is obtained by dividing its GDP for a particular period by its average population for the year.
There are other adjustments of GDP you can do, but ALL GDP FIGURES ARE BASED ON THE FORMULA FOR CALCULATING GDP
AS YOU CAN SEE, THE WORLD BANK HAS A BETTER METHOD FOR CALCULATING COUNTRY WEALTH, AS DESCRIBED IN THE ORIGINAL ARTICLE.
And you forgot about GDP per capita ppp, the best measure of standard of living that considers COL.
