GDP – Gross Domestic Product

Government Spending (G)

It is the sum of government expenses regarding the services and the final goods, which mainly includes purchase of military arms and weapons, public servant salaries and investment of the government in any field.

Exports (X)

GDP calculates the amount a country produces, that include  goods and services produced for any other nations’ consumption, due to the surplus amount that has been produced after which therefore exports are added.

Imports (M)

Since imported goods will be included in terms like G, I, or C, it is of vital importance that export must be deducted in order to avoid counting foreign supply as domestic.

GDP VS GNP

GDP is the total value of good and services produce in the country whereas GNP is total value of good and services produce in the country and also add the value of commodities produce  by the people of the country in foreign.

Methods of Measuring GDP

Gross domestic product is measured using three methods as mentioned below.

The Expenditure Approach – The sum of total spending on producing good and services, GDP using this method can be calculated by sum up consumption, Government spending,Invest and exports deducting imports.

The Income Methods – Measuring GDP by Calculating the income of people who are responsible for producing the good and services.

Product Approach – Total value of product and services product in the country.