GDP is the market value of all goods and services produced by a country in a certain period. GDP is one method for calculating national income.
Gross Domestic Product is defined as the overall value of all goods and services produced in the region within a certain time period (usually per year).
Nominal GDP refers to the value of GDP without regard to the effect of prices. Whereas real GDP ← (or called GDP at Constant Prices) → corrects nominal GDP figures by including the effect of prices.
GDP can be calculated using two approaches, the expenditure approach and the income approach. The general formula for GDP with the expenditure approach is:
GDP = consumption + investment + government expenditure + (export-import)
Where consumption is expenditure carried out by households, investment by the business sector, government spending by the government, and exports and imports involving the foreign sector.
While the income approach calculates the income received by the factor of production
GDP = rent + wage + interest + profit
Where rent is the owner's income fixed factors of production such as land, wages for labor, interest for capital owners, and profits for entrepreneurs.
In theory, GDP with the expenditure and income approach should produce the same figures. However, because in practice calculating GDP using the income approach is difficult, then what is often used is the expenditure approach.
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class: high school
subject: Business
keywords: GDP, market, value
