The gross domestic product (GDP) or gross domestic income (GDI) is a basic measure of a country's overall economic output. It is the market value of all final goods and services made within the borders of a country in a year. It is often positively correlated with the standard of living Standard of living is generally measured by standards such as real income per person and poverty rate. Other measures such as access and quality of health care, income growth inequality and educational standards are also used. Examples are access to certain goods (such as number of refrigerators per 1000 people), or measures of health such as life,[1] though its use as a stand-in for measuring the standard of living has come under increasing criticism and many countries are actively exploring alternative measures to GDP for that purpose.[2] GDP can be determined in three ways, all of which should in principle give the same result. They are the product (or output) approach, the income approach, and the expenditure approach. The most direct of the three is the product approach, which sums the outputs of every class of enterprise to arrive at the total. The expenditure approach works on the principle that all of the product must be bought by somebody, therefore the value of the total product must be equal to people's total expenditures in buying things. The income approach works on the principle that the incomes of the productive factors ("producers," colloquially) must be equal to the value of their product, and determines GDP by finding the sum of all producers' incomes.[3]
Example: the expenditure method:
- GDP = private consumption Consumption is a common concept in economics, and gives rise to derived concepts such as consumer debt. Generally consumption is defined by opposition to production. But the precise definition can vary because different schools of economists define production quite differently. According to some economists, only the final purchase of goods and + gross investment Investment is the commitment of money or capital to purchase financial instruments or other assets in order to gain profitable returns in form of interest, income, or appreciation of the value of the instrument. It is related to saving or deferring consumption.[citation needed] Investment is involved in many areas of the economy, such as business + government spending Government spending or government expenditure is classified by economists into three main types. Government purchases of goods and services for current use are classed as government consumption. Government purchases of goods and services intended to create future benefits, such as infrastructure investment or research spending, are classed as + (exports The term "export" is derived from the conceptual meaning as to ship the goods and services out of the port of a country. The seller of such goods and services is refered to an "exporter" who is based in the country of export whereas the overseas based buyeris refered to as an "importer". In International Trade, " − imports The term "import" is derived from the conceptual meaning as to bring in the goods and services into the port of a country. The buyer of such goods and services is refered to an "importer" who is based in the country of import whereas the overseas based seller is refered to as an "exporter". Thus an import is any good), or
In the name "Gross Domestic Product," "Gross" means that GDP measures production regardless of the various uses to which that production can be put. Production can be used for immediate consumption, for investment in new fixed assets or inventories, or for replacing depreciated fixed assets. If depreciation of fixed assets is subtracted from GDP, the result is called the Net domestic product The net domestic product equals the gross domestic product (GDP) minus depreciation on a country's capital goods; it is a measure of how much product is available for consumption or adding to the nation's wealth. In the above formula for GDP by the expenditure method, if net investment (which is gross investment minus depreciation) is substituted for gross investment, then net domestic product is obtained.
"Domestic" means that GDP measures production that takes place within the country's borders. In the expenditure-method equation given above, the exports-minus-imports term is necessary in order to null out expenditures on things not produced in the country (imports) and add in things produced but not sold in the country (exports).
Economists (since Keynes John Maynard Keynes, 1st Baron Keynes, CB was a British economist whose ideas have been a central influence on modern macroeconomics, both in theory and practice. He advocated interventionist government policy, by which governments would use fiscal and monetary measures to mitigate the adverse effects of business cycles, economic recessions, and) have preferred to split the general consumption term into two parts; private consumption, and public sector The public sector, sometimes referred to as the state sector is a part of the state that deals with either the production, delivery and allocation of goods and services by and for the government or its citizens, whether national, regional or local/municipal (or government) spending. Two advantages of dividing total consumption this way in theoretical macroeconomics Macroeconomics (from prefix "macr-" meaning "large" + "economics") is a branch of economics that deals with the performance, structure, behavior and decision-making of the entire economy, be that a national, regional, or the global economy. Along with microeconomics, macroeconomics is one of the two most general are:
- Private consumption is a central concern of welfare economics Welfare economics is a branch of economics that uses microeconomic techniques to simultaneously determine allocative efficiency within an economy and the income distribution associated with it.[citation needed] It analyzes social welfare, however measured, in terms of economic activities of the individuals that comprise the theoretical society. The private investment and trade portions of the economy are ultimately directed (in mainstream economic models) to increases in long-term private consumption.
- If separated from endogenous In an economic model, a parameter or variable is said to be endogenous when there is a correlation between the parameter or variable and the error term. Endogeneity can arise as a result of measurement error, autoregression with autocorrelated errors, simultaneity, omitted variables, and sample selection errors private consumption, government consumption can be treated as exogenous Exogenous (from the Greek words "exo" and "gen", meaning "outside" and "production") refers to an action or object coming from outside a system. It is the opposite of endogenous, something generated from within the system,[citation needed] so that different government spending levels can be considered within a meaningful macroeconomic framework.
Gross domestic product comes under the heading of national accounts National accounts or national account systems provide a complete and consistent conceptual framework for measuring the economic activity of a nation (or other geographic area in the broader term social accounts). These include detailed underlying measures that rely on double-entry accounting. By construction such accounting makes the totals on, which is a subject in macroeconomics Macroeconomics (from prefix "macr-" meaning "large" + "economics") is a branch of economics that deals with the performance, structure, behavior and decision-making of the entire economy, be that a national, regional, or the global economy. Along with microeconomics, macroeconomics is one of the two most general. Economic measurement is called econometrics Econometrics is concerned with the tasks of developing and applying quantitative or statistical methods to the study and elucidation of economic principles. Econometrics combines economic theory with statistics to analyze and test economic relationships. Theoretical econometrics considers questions about the statistical properties of estimators.
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October 31 2003 Robust GDP Growth Might Signal a Real Economic Recovery But Consumer Spending Slips The nation s economy spiked in the past several weeks more robustly so than in years Here re a few URLs to check out Economy Reports Speediest Growth Since the Mid 80 s
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Per Capita Income and . GDP. by District Wise in A.P.. Per Capita Income (in Rupees) in 2007-08. 1, Hyderabad, 51856. 2, Visakhapatnam, 51146 ... . GDP. (in Crore Rupees) in 2007-08. 1, Hyderabad, 25272. 2, Visakhapatnam, 24837 ...
