What is Gross Domestic Product (GDP)?

Countries by GDP (PPP) per capita (Int$) in 2017 according to the IMF   > 50,000   35,000–50,000   20,000–35,000   10,000–20,000   5,000–10,000   2,000–5,000   < 2,000   No data

How do we measure the size of an entire economy, that is through GDP, in fact most of the things which are around us are part of GDP like the laptop or Smartphone in which you are probably reading this blog, GDP stands for Gross Domestic Product, Simply putting, GDP measures the total value of all goods and services in country for each year, that means it measures a lot of stuff in a lot of money. One of the most popular equation methods to calculate GDP is:

 

                                       GDP= C+ I + G + +NX

C stands for consumer spending, it is the money which you and I spend on coffee, mobile phones, and services like a haircut, consultancy etc. This contains a big chunk of any GDP and hugely affect the direction of countries GDP.

I mean Investment, this measures how much money is invested in building, land, and equipment. It also consists of consumer’s one of the major and huge investment, buying a home.

Here, G is Government Expenditure, it means the amount which local stated and central states spends on roads, public institutions, development and other facilities provided by the government.

NX Stands for Net Export, It is the difference between Exports and Imports (E-I) of a country. Let say we import 10 fans and export 6 fans, therefore our next export is going to be negative because export is less and import is comparatively more.

GDP is not perfect, It does not measure economic equality and well being of the countries population, so even if the GDP is growing, wealth may be distributed unevenly plus GDP does not includes unpaid work like Volunteer’s or charity.