GDP: what is it and types - GovtVacancy.Net

GDP: what is it and types - GovtVacancy.Net
Posted on 22-10-2022

GDP: what is it and types

The gross domestic product, or GDP, is one of the key indicators that characterize the development of any economy. We tell you in detail everything you need to know about it.

What is GDP?

GDP (Gross Domestic Product) is the total monetary value of all final goods and services produced and sold by a country in a given period of time. In Russia and Europe, GDP is calculated year by year, as well as quarter by quarter. The US and Japan have a different calculation method: GDP estimates are published on an annualized basis for each fiscal quarter as well as for the calendar year.

GDP is the most widely used measure of economic activity. It is used both to assess the growth or decline of the economic condition of a particular country and to measure the global economy and compare the economies of countries with each other.

GDP types

Nominal Gross Domestic Product

Nominal GDP (current GDP, GDP at current prices) is the value of goods and services calculated at the prices at which they are actually sold in that year, without any adjustment for inflation. Nominal GDP in simple terms is the answer to the question of how much money is used to produce goods and services.

Nominal GDP is estimated in local currency or, for comparison, countries' GDP in purely financial terms in US dollars at the foreign exchange market exchange rate.

An increase in a country's nominal GDP may be due to rising prices and therefore does not always reflect any change in the quantity or quality of goods and services produced.

Real GDP

Real GDP is the value of goods and services, calculated at the prices of a specific year, which allows you to exclude inflation/deflation from nominal GDP and compare real output in different years.

Real GDP is calculated using the GDP price deflator, which is the difference in prices between the current year and the base year. For example, if prices increased 5% compared to the base year, the deflator would be 1.05. Nominal GDP is divided by this deflator to give real GDP. Nominal GDP is usually higher than real GDP because inflation is usually a positive number.

GDP per capita

The GDP per capita is the relationship between the GDP and the population of the country, which shows how much of the gross product produced in the country per year and expressed in terms of value, corresponds to an inhabitant of this country. This indicator is used, first of all, to determine the standard of living of the population in a particular state. The GDP per capita is a criterion for evaluating the economy of the state and is used for the international comparison of the levels of well-being of different countries.

GDP per capita is often analyzed alongside more traditional measures of GDP. Economists use this measure to understand the domestic productivity of a country and the productivity of other countries. GDP per capita takes into account both the GDP of a country and its population. Therefore, it may be important to understand how each factor contributes to the overall result and affects GDP per capita growth.

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