What is the full form of GDP?
Gross Domestic Product is the full form of GDP. It is the final value of all goods and services produced within the geographic boundaries in a specific time period. As a broad measure of overall domestic production, GDP is an important indicator of the economic performance of a country. The term GDP is used to explain the size of the economy. GDP growth rates indicate the speed of economic growth of a country on an annual basis, but sometimes it is calculated on a quarterly basis as well.
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Types of GDP
GDP can be calculated in three ways, the result will slightly be different in each case:
1. Output method: This method is used to measure the monetary or market value of all goods and services produced in a country in a specific period. In order to avoid a distorted calculation of GDP due to fluctuation in prices, GDP is computed at constant prices or real GDP.
Formula: GDP = Real GDP (GDP at constant prices) – Taxes + Subsidies
2. Expenditure method: This is another method to estimate the GDP by measuring the total expenditure incurred by all individuals on goods and services in the country.
Formula: GDP = C + I + G + (X – M)
C: refers to consumption
I: refers to investment
G: refers to government spending
X: refers to exports
M: refers to imports
3. Income method: The income method calculates the income earned by all factors of production in an economy, including wages paid to labor, rent earned by land, return on capital in the form of interest, etc.
Formula: GDP = A + T – S
A = GDP at factor expense
T = Taxes
S = Subsidies
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