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Gdp,Gross Domestic Product
GDP (Gross Domestic Product)
Gross domestic product (GDP) is a measure of a country’s total output of goods and services in a particular period of time. It is the sum of all spending, saving, investment, and government purchases within a country’s borders.
Formula:
GDP = C + I + G + NX
where:
- C is consumer spending
- I is investment spending
- G is government spending
- NX is net exports
Components of GDP:
- Consumer spending: Expenditures by households on goods, services, and durable goods.
- Investment spending: Expenditures by businesses on capital goods, such as equipment, buildings, and inventory.
- Government spending: Expenditures by government agencies on goods, services, and transfers to individuals.
- Net exports: Exports of goods and services minus imports.
Importance of GDP:
- Measure of economic growth: GDP growth is a key indicator of a country’s economic strength and progress.
- Gauge of economic well-being: GDP per capita (GDP divided by population) is an estimate of a country’s average standard of living.
- Policy tool: GDP is used to inform policy decisions, such as monetary policy and fiscal policy.
- Comparison: GDP allows for comparisons between countries and regions.
- Economic stability: GDP stability is important for economic growth and stability.
Key Points:
- GDP is a measure of a country’s total output of goods and services.
- It is the sum of spending, saving, investment, and government purchases.
- GDP growth is a key indicator of economic growth.
- GDP per capita is an estimate of a country’s average standard of living.
- GDP is used as a policy tool and for comparison purposes.