What is a GDP?

Gross Domestic Product (GDP) is a monetary measure of the market value of all the final goods and services produced within a country's borders over a specific period, typically a year or a quarter12. It serves as a comprehensive indicator of a country's economic health and growth rate. GDP can be calculated using three main approaches: the expenditure approach, the production (or output) approach, and the income approach12.

Key Components of GDP

• Expenditure Approach: This method calculates GDP by summing up consumer spending (C), government spending (G), investment (I), and net exports (NX), where net exports are exports minus imports1. [ \text{GDP} = C + G + I + (X - M) ]

• Production Approach: This involves summing the value added at each stage of production across different sectors of the economy2.

• Income Approach: This method calculates GDP by summing the incomes earned by all factors of production, including wages, rents, interest, and profits2.

Types of GDP

• Nominal GDP: This measures GDP using current prices and does not account for inflation1.
• Real GDP: This is an inflation-adjusted measure that reflects the actual quantity of goods and services produced, using constant prices1.
• GDP Per Capita: This measures GDP per person in a country, providing insights into average productivity and living standards12.

Limitations of GDP

While GDP is widely used to assess economic performance, it has limitations. It does not account for non-market activities, environmental degradation, or income inequality2. Alternative metrics, such as the Human Development Index (HDI), are sometimes used to provide a more comprehensive view of a country's well-being2.