What Does GDP Stand for

what is the GDP:

Is known as the GDP to the initials of “Gross domestic product” is the monetary value of all goods and services produced in a given region, during a given period, usually a year.

GDP is one of the most widely used in macroeconomic indicators that has as main objective measure economic activity, taking into account only the goods and services produced within the formal economy of a given territory regardless of the origin of the companies, excluding everything that occurs within the framework of the informal economy, or illicit business.

To analyse the behaviour of the GDP of a country, it is necessary to distinguish between nominal GDP, real GDP, and GDP per capita.

Nominal GDP, is characterized by the value to prices of market or current for the goods and services produced in a given time. When that it is taken into account the current prices, they are those that are laid down in the goods and services when determining GDP, which often are affected by inflation or deflation, and in this context the experts suggest to take into account the real GDP.  The real GDP is calculated by the constant price of the final goods and services produced in a country. Constant prices are calculated from a base – year which eliminates the changes that arise as a result of inflation or deflation in prices. GDP per capita, is the division of the GDP by the number of inhabitants of a country. The respective indicator as a measure of social well-being or quality of life of the inhabitants that make up a country is strongly criticized because it ignores the economic inequalities that exists among the inhabitants since the same level of income attributed to all.

GDP is calculated as expenses flow or flow of income. In the first case, taking into account the following indicador:

the consumption of goods and services purchased by the family and companies. Investment especially by the companies. Public spending also acquired by the public administration, in this context includes the salaries of civil servants. The result of exports – imports.

Now, such as income distribution, taking into account: salaries, rents, taxes (VAT, income receiving State), benefits given to the owners of the company, and depreciation.

In relation to outcomes that can arise in the calculation of GDP, if a country’s GDP increases indicates increase in the production of a country, as well as increase in economic investment. Also, growth of GDP represents revenue for the Government through taxes, so it is very important the role of the State in the economic strength of a country and provide security and conditions for the investment of new companies and the growth of existing ones.

GDP and GNP

GDP comprises the income generated by foreign nationals working in the country, but not the nationals working abroad since it is counted in the GDP of the country. Meanwhile, the GNP is the income generated by a country’s citizens, and the citizens of the country that is located in another, and excludes foreigners living in the country.

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