Gross domestic product

In economics, gross domestic product (GDP) is how much a place produces in an amount of time. GDP can be calculated by adding up its output (total production) inside a country.

To find the GDP of a country, one adds up all consumer spending (C), all investment (I), all government spending minus taxes (G), and the value of exports minus imports (X – M). This is shown by the equation:

${\displaystyle GDP=C+I+G+(X-M)}$

This measure is often used to find out how healthy a country is; a country with a high value of GDP can be called a large economy. The United States has the largest GDP in the world.^[1] Germany has the largest in Europe,^[2] Nigeria in Africa^[3] and China in Asia.^[4]

When a country's GDP is negative for two consecutive quarters it is considered to be in a recession. This is an unhealthy state for the country.

There are different ways to calculate GDP. Nominal GDP is the total amount of money spent on all the goods (new and final) in an economy; however, real GDP (adjusting for changes in prices) tries to correct this number for inflation. For example, if the prices rise by 2% (meaning, everything costs 2% more) and the nominal GDP grows by 5%, the real GDP growth is only increased by 3%.

1. ↑ Economic Power in a Changing International System - Page 25, Ewan W. Anderson, Ivars Gutmanis, Liam D. Anderson - 2000
2. ↑ OECD Reviews of Regulatory Reform, 2004, p 92
3. ↑ "Africa's new Number One". The Economist. 12 April 2014.
4. ↑ China and the World Economy, Yih-chyi Chuang, Simona Thomas - 2010