Gross domestic product

In economics, the gross domestic product (GDP) is a measure of the amount of the economic production of a particular territory during a specific time period.

GDP is defined as the total value of all goods and services produced within that territory during a specified period (most commonly, per year). GDP differs from gross national product in excluding inter-country income transfers, in effect attributing to a territory the product generated within it rather than the incomes received in it.

Whereas nominal GDP refers the total amount of money spent on GDP, real GDP refers to an effort to correct this number for the effects of inflation in order to estimate the sum of the actual quantity of goods and services making up GDP. The former is sometimes called "money GDP," while the latter is termed "constant-price" or "inflation-corrected" GDP -- or "GDP in base-year prices" (where the base year is chosen arbitrarily). See real vs. nominal in economics.

A common equation for GDP is:

GDP = consumption + investment + government expenditures + exports - imports

Aggregate expenditures are calculated in a similar way, although the aggregate expenditures formula does not account for unplanned investment (left over inventory at the end of the reporting cycle) and is more commonly used by economic theorists.

GDPs of different countries may be compared by converting their value in national currency according to either

• current exchange rate method: GDP calculated by exchange rates prevailing on international currency markets
• purchasing power parity method: GDP calculated by purchasing power parity (PPP) of each currency relative to a selected standard (usually the United States dollar).

The relative ranking of countries may differ dramatically between the two approaches.

The purchasing power parity method, gives a better clue of the living standards as using official exchange rates can routinely understate the relative effective domestic purchasing power of the average producer or consumer within a less-developed economy by 50-60% owing to the weakness of local currencies on world markets.

The current exchange rate method, on the other hand, using a comparison based on official exchange rates, can offer a better indication of a country's purchasing power on the international market for goods and services, and gives an idea of the economical power of a country.

For more information see measures of national income.

Problems

Problems with GDP include:

• Very often different calculations of the GDP are confused among each other. One should especially regard whether it is calculated by purchasing power parity method or current exchange rate method.
• GDP, as a measure of economic size, fails to measure well-being and living standards accurately.
• GDP doesn't take into account the black economy, non-monetary economy such as bartering, volunteer work, or informal creation of wealth, such as unpaid childcare provided by non-working parents.
• GDP doesn't measure the sustainability of growth, as a country may achieve a temporary high GDP by over-exploiting natural resources.
• GDP counts work that produces no net gain. For example, if a factory pollutes a river, that boosts GDP, and when the taxpayers pay to have it cleaned up, that boosts GDP again.

List of total GDP by country (Purchasing Power Parity Method)

(1) Although the European Union is not formally a nation, it is tied together with a single currency (excluding the UK, Sweden, Denmark, and the 10 new member states) and is considered by some to be a single entity.

The methodology for deriving accurate PPP comparisons remains under constant review, and questions have been raised as to whether the relative size of Mainland China's GDP may be overstated to some extent.

Source: CIA World Factbook: PPP , PPP/Capita , Population

For further data, see List of countries by GDP (PPP)

List of total GDP by country (Current Exchange Rate Method)

Total GDP 2002 (millions of Ranking Economy US dollars), (i.e. no PPP as in the list above) (If changing number, please use the same source for all countries)
(data slightly outdated, current ranking would place the European Union of the first rank)

1. USD 10,383,100 -- United States
2. USD 9,040,722 -- European Union-25
3. USD 3,993,433 -- Japan
4. USD 1,984,095 -- Germany
5. USD 1,566,283 -- United Kingdom
6. USD 1,431,278 -- France
7. USD 1,266,052 -- Mainland China
8. USD 1,184,273 -- Italy
9. USD 714,327 -- Canada
10. USD 653,075 -- Spain
11. USD 637,203 -- Mexico
12. USD 510,177 -- India
13. USD 476,690 -- South Korea
14. USD 452,387 -- Brazil
15. USD 417,910 -- Netherlands
16. USD 409,420 -- Australia
17. USD 346,520 -- Russian Federation
18. USD 267,445 -- Switzerland
19. USD 245,395 -- Belgium
20. USD 240,313 -- Sweden
21. USD 204,066 -- Austria
22. USD 190,477 -- Norway
23. USD 189,021 -- Poland

Source: Worldbank

This ranking is different to the previous as it is based on the currency exchange rate and not on the PPP.

For further data, see list of countries by GDP.

See also

• GDP deflator
• Measures of national income
• Natural gross domestic product

External links

• What's wrong with the GDP?
• Complete listing of countries by GDP: Purchasing Power Parity Method and Current Exchange Rate Method

zh-cn:国内生产总值