Gross Domestic Product

Gross national product (GDP) is a total of the outputs recorded in a country’s national accounts. It is the best-known of such totals, and estimates of its growth rate are widely used as indicators of the prospects of inflation or unemployment. Efforts are constantly being made to overcome its limitations for that and other purposes.

Definitions

Gross domestic product (GDP) can be defined as the total recorded value of the goods and services produced within an economy. The word "gross" indicates that no deduction is made for the loss of value due to the depreciation of assets, and the word "domestic" indicates that net income from abroad is not included. (If income from abroad is allowed for, gross domestic product becomes gross national product (GNP), and if depreciation is also allowed for, it becomes net national product or simply national income).

GDP can in fact be defined as either the total recorded output of the economy’s producers, or the total recorded expenditure of its investors and consumers, or the total of all recorded payments of wages, interest and rent - all of which totals are, in principle, equal. It is normally stated as "GDP at market prices", which indicates that the prices used include the effects of indirect taxes and subsidies. In an alternative version that matches payments to the factors of production, indirect taxes (such as sales taxes) are deducted, and subsidies (which are the equivalent of negative sales taxes) are added back - and the adjusted total is then termed "GDP at factor cost". Published statistics normally include estimates of "GDP at constant prices", which are obtained by applying approximate price index adjustments to the recorded values of its components. Time-series thus adjusted are commonly referred to as showing "real", as distinct from "nominal", changes of GDP.