Gross product of the country. What is GDP and why is it needed

Gross domestic product (GDP) is the sum of the values ​​of all goods and services produced in a country. Indicated in US dollars. Determined at the end of the financial year. By calculating GDP annually, one can trace the development of the economy. A change in the indicator may indicate how successful the economic policy was in the state. Knowing how to calculate GDP will help you understand the course of many macroeconomic processes.

GDP is found in one of three ways.

End-Use Method or Calculation of Gross Domestic Product by Expenditure

When calculating the GDP indicator in this way, it is necessary to add up the costs of all participants in the economic process, namely:

• Consumer expenditures of citizens (All expenditures that are made by households, as well as the state for the maintenance of budgetary organizations, the costs of non-profit firms for the purchase of products for personal and joint use, if organizations serve households; at the same time, expenses are long-term, for example, buying a car, and short-term - the purchase of products, expenses for the purchase of services, including on credit, are separately allocated);
• The totality of investments in the economy (Investments are considered to be funds invested by an organization or an individual, for example, in the purchase of equipment, as well as the purchase of real estate or software for the operation of the company. The exchange of assets is not considered an investment, and the acquisition of funds is savings. Also, the purchase itself securities are not considered an investment if the company subsequently does not use this proceeds to modernize production, etc.)
• Government Expenditures (Funds spent by the government on the purchase of final goods. This includes the payment of salaries to state employees and the purchase of weapons, as well as public investment.)
• Net exports (is the difference between the total value of imported and exported products)

We get the GDP formula for calculating expenditures, which determines the GDP by the end use method:

GDP = C + I + G + Xn

In the formula for expenses: C - consumer spending, I - investments, G - state. costs and X is an indicator of net exports (from the total value of exported, we subtract the amount of imported).

Production method or finding the sum of all added values

To calculate the GDP indicator in this way, it is required to add up all the value added of goods manufactured in the country. Value added is that which does not include the market prices of the products purchased to produce the final product or service, hence it is the value incurred in production. Otherwise, when calculating GDP, some goods/services will be counted twice, and the result will be significantly distorted upwards.

The advantage of this method is that it allows you to evaluate the role of a certain production, organization in the structure of the state GDP. To find DS (value added), you need to subtract the amount spent on products needed in production from the profit received during the implementation.

We get the following formula for calculating GDP:

GDP = PV + NPI - C, where: PV is value added, NIP is a tax on production and imports, and C is subsidies on imports and production.

Method of accounting for GDP by income or distribution method

We get the following formula for calculating GDP:

GDP \u003d ZP + R + Pr + VD + KS + A - NFD (from abroad)

in which: ER is the funds spent on employee benefits, P is the cost of rent, Pr is the interest revenue on , TC is indirect taxes, A is depreciation and NFD is foreign net factor income.

GDP is calculated in money, so it is necessary to take into account the price dynamics during the reporting period. Therefore, there are two types of GDP.

Nominal is determined in prices that exist at the current moment. It can increase in two cases: with an increase in production volumes and with an increase in prices. Real GDP is calculated taking into account the prices of the base period - the one that is taken as a basis. For example, in the United States - 1996.

Real GDP is an indicator of output, since an increase or decrease in prices does not change its indicator. To find real GDP, you need to adjust the nominal GDP by the price index. To do this, the nominal GDP indicator must be divided by a price index equal to the ratio of prices in the year under consideration to prices in the base year.

To bring nominal GDP to a real indicator, you need to know the consumer price index or. The CPI is affected by the cost of the 300 most commonly purchased goods, and the GDP deflator summarizes the change in prices of all goods.

Almost everyone who has read or watched economic news has come across such a concept as GDP. For ordinary people, it may seem complicated and incomprehensible, but in fact it is not.

GDP is a macroeconomic indicator that characterizes the level of development of the state; the sum of all services and goods produced in the country for a certain period, expressed in monetary terms. Absolutely everything is included in the value of the gross product: from sold tourist packages, cars, public transport to chewing gum and movie tickets.

What is the difference between GDP and GNP

In addition to GDP, there is also such a thing as the Gross National Product. Although they are similar to each other, there is a fundamental difference in the calculations. GDP takes into account the cost of services and goods produced only in the territory of the state. However, due to the international division of labor, part of the capacity of national enterprises is outside its borders.

This is primarily due to the distribution of natural resources, as well as the price of labor. For example, many American companies have factories in China and India. It turns out that the budget of enterprises is replenished by other states. GDP takes into account all services and goods within the country, and GNP is goods and services produced by national companies.

Types of gross domestic product

There are three types of gross product:

• nominal;
• real;
• per capita.

For simplicity, consider GDP using the example of an ordinary family of 3 people. Suppose in 2010 the total family income was 900 thousand rubles, and next year - 1 million rubles.

The nominal gross product is calculated without taking into account inflation, that is, to determine the growth rate of nominal GDP, you just need to divide the 2011 figure by the 2010 figure and multiply by 100%. It turns out that in 2011 family income increased by 11.1 percent over the year. Everything would be fine, but nominal GDP does not take into account price increases.

Actually, real GDP takes into account inflation. In 2011, it was at the level of 11.4 percent. Given this fact, in 2011 the family began to live 11.1-11.4 = -0.3 percent worse than last year. These calculations show the financial condition of the family within the country. To compare wealth with families from other countries, the GDP of a Russian family needs to be converted into dollars - this indicator is called per capita purchasing power.

Find out the level of GDP

Every resident of the country can find out the GNP or GDP indicators for any period. To do this, you need to visit the official web resource of Rosstat.

To calculate GDP, the statistics department uses three methods:

• at an added cost;
• distribution;
• on expenses.

In this case, the total amount in the three cases is exactly the same. In fact, this is logical - the amount of macroeconomic income is equal to the amount of expenditure.

The distributive method of calculating the gross domestic product includes:

• indirect taxes;
• depreciation;
• net income from trading with foreign agents;
• national income.

The most multifactorial indicator listed above is national income. It consists of:

• rental income;
• salaries and bonuses;
• entrepreneurial profit;
• interest on loans.

In the distribution system does not take into account the salaries of civil servants and direct taxes.

In the calculation of GDP by expenditure, the following are taken into account:

• consumer spending - expenses for the purchase of goods, clothing, medicine, transport, education, etc.;
• investment expenses - investments in production, resources, real estate and fixed assets;
• government spending - government investment, spending on national security, maintaining the apparatus of state power;
• trade balance.

The production method or value added method is the difference between income and cost of manufactured products. To calculate GDP, you need to sum up all the value added for each industry.

Russian GDP in 2017

According to the initial estimate of Rosstat, GDP growth in 2017 amounted to 1.5 percent, which is comparable to the forecast of the Ministry of Economic Development made at the end of December 2016. In monetary terms, the gross product exceeded 92 trillion rubles. The price inflation index for 2017 was 5.5 percent. The largest revenue growth last year was in entertainment, sports, wholesale and transportation.

Falling incomes were observed in healthcare, construction and education. For end consumers, spending increased by 3.4 percent, while gross capital formation, on the contrary, increased by as much as 7.6 percent. Imports of goods exceeded exports by 12 percent. As you can see, economic indicators are not very difficult to understand. Thanks to them, one can understand the vector of the country's development, and this is one of the main elements of the well-being of every family.

GDP - the "wallet" of the state

The initial letters of the expression "Gross Domestic Product" (what do you think?)
Gross domestic product is one of the most important economic indicators of a country's economic activity. It indicates the market value of all goods and services produced in the country during the year for the purpose of consumption, export and accumulation, with the exception of the cost of intermediate goods and services, that is, raw materials, fuel, energy, feed and others.

This is done to avoid double billing. For example, the cost of a car includes the cost of iron, which is used to make steel; steel from which rolled products are obtained; the rental from which the car is made.

GDP - (deciphering - Gross Domestic Product) is the most complete indicator of social welfare. It gives an idea of ​​the general material well-being of the nation, since the higher the level of production, the higher the welfare of the country.

The gross domestic product is determined by money, because only money serves as a measure of the value of goods and services, only with the help of this universal equivalent can one add up wheat and washing machines, books and tractors, mobile phones and the services of shoemakers and doctors.

There is nominal and real GDP. The first is expressed in current prices of a given year. The second - in the prices of the previous or any other base year. Real GDP takes into account the extent to which GDP growth is driven by real output growth rather than price increases.

The gross domestic product is expressed in national currency, but for the convenience of international relations, GDP is calculated in US dollars. Comparability of indicators is ensured by a single methodology for determining GDP, developed by the UN statistical service and adopted in most countries of the world.

The history of the emergence of calculations of the Gross Domestic Product

For the first time, an attempt to measure the economic activity of the state was made by a former Russian citizen, and then an American economist Simon Kuznets (Shimon Abramovich Kuznets). His first calculations appeared in 1934. In 1937, he presented to the US Congress calculations of indicators of US economic activity for 1929-1935. In 1971, S. Kuznets was awarded the Nobel Prize in Economics for his scientific exploits.

Leaders in terms of GDP for 2012 (in million dollars)

• USA - 72 440 449
• China - 16,244,600
• Japan - 8 223 103
• Germany - 5 959 718
• France - 2,612,878
• United Kingdom - 2,471,784
• Brazil - 2,252,616
• Russia — 2 014 775
• Italy - 2 014 670
• India - 1,841,717

In 2013, GDP growth in Russia amounted to 1.3%

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GDP, or gross domestic product, is a significant economic value that shows the total value of goods and services produced. The market price for the goods is determined in the calculations for the year. Specialists calculate the cost of services from various sectors of the economy operating within a particular state. The macroeconomic indicator does not depend on the nationality of the applied production factors.

With the help of GDP, economists manage to objectively evaluate all production directed to investment or immediate consumption. When calculating this indicator, you can find out:

• national income of the country;
• business success;
• the degree of activity of subjects of economic activity;
• potential trends of macroeconomic processes.

Gross national product (GNP) refers to the value of the national economy, which is determined without taking into account the location of the national enterprise. This means that a certain amount of GNP is produced abroad.

GDP differs from GNP by the difference between income received from abroad or as a result of foreign investment. This indicator is used to perform an accurate assessment of the well-being of the population. The higher the GNP, the higher the national income.

Types of GDP

Nominal GDP takes into account the prices for goods in a state or its region, taking into account current economic changes. The higher the price of services and products, the higher this indicator. When answering the question of what nominal GDP is, specialists need to monitor the dynamics of the price and income index.

Real GDP is affected by trends in production processes. This macroeconomic value is often expressed in terms of prices for previous years.

The GDP deflator is the ratio of nominal GDP to real GDP.

Why is it important to calculate GDP per capita?

This economic value shows the level of material well-being of society. Often, the solvency of the population is determined by comparing the values ​​of GDP per capita.

How to find out the size of GDP

In economics, there are 3 main methods of calculation:

1. value added;
2. by income;
3. on expenses.

GDP value added

This method of calculation is called production. It assumes that the indicator includes the sum of the value added of products. In turn, value added is determined by the difference between firms' income and production costs. The total value added is calculated after deducting the value of the output level intermediate.

When using this method, the final result will correspond to the amount of value added. This value does not include tax payments transferred to ensure production processes. Thus, the final value differs from the total value added established in the provision of services and the production of goods.

GDP by income

To calculate, add national income and depreciation, and then subtract from the resulting number the amount of indirect taxes, government subsidies and net factor income. To determine the national income, the economist adds up the total profit of the company, interest payments, and rent and wages of workers.

By performing these calculations, you can find out the operating difference, from which the surplus or deficit that occurs in the course of production activities is determined. An increase in profit or loss may be triggered by the transfer of any interest, payments on tangible or financial assets.

GDP by expenditure

The indicator is the sum of final consumption, investment capital, net exports and government spending. To understand the formula, each component should be considered in more detail.

Consumption is a significant economic indicator that consists of private consumption, that is, the amount of consumer spending on short-term and long-term goods and services. A good example of common costs are payments for medical care and drugs, payment of utility bills and rent of premises.

The investment component means the amount of cash investments transferred by the company for the purpose of purchasing new technical equipment, updating technological methods, introducing modern operating principles and improving the professional qualifications of employees. Corporations regularly invest heavily in the automation of production mechanisms, computerization of workplaces and software updates.

Making an investment does not preclude the possibility of exchanging existing assets. The investment segment includes expenses incurred to acquire real estate. The purchase of financial products cannot be considered an investment, as it is considered part of savings transactions.

Such an element of the formula as government spending is defined as the amount of government spending transferred in favor of economic entities. Authorized state bodies have an obligation to provide financial support through:

• payroll in favor of budget employees;
• meeting military needs.

When calculating net exports, it is necessary to find the difference between exports and imports. Exports are defined as the volume of domestic goods supplied to foreign consumers. Imports mean the amount of services and goods received from foreign suppliers.

Once all components of the formula have been established, professionals can track the costs incurred by various economic actors (for example, government agencies, private enterprises, and households) in order to satisfy final needs.

Economists' forecasts, voiced in news stories, often talk about changes in GDP up or down. However, it is quite difficult for unprepared people to understand what exactly this can turn out to be for the country. Let's figure out what GDP is and how its value affects the lives of ordinary citizens.

GDP and GNP: what is it about

From school courses in economic geography and the basics of economic literacy, many learned that GDP is one of the macroeconomic indicators by which the level of development of a country is assessed. And the higher it is, the more prosperous the inhabitants of the state. This is true, but only in part. For specialists, the significance of GDP lies in the fact that it allows you to evaluate and predict:

• the national income of any state;
• the success of its business activities;
• the level of activity of economic entities;
• direction of economic development.

Gross domestic product, and this is how the abbreviation is deciphered, reflects the valuation of all goods produced on the territory of the state and services rendered for a certain period. The calculation of GDP includes the value of production in all areas: industry, agriculture, services, transport, etc. The contribution of each of them is different, as, for example, in the above diagram.

As a rule, it is customary to compare GDP for the year, but smaller periods, for example, a quarter, can be taken for analysis to reflect the dynamics of GDP. For ease of comparison, the cost of the economy is given in US dollars, as the most stable world currency. However, national currency units can also be used in estimating this indicator.

Only the final product created exclusively within the territorial boundaries of the country is taken into account. However, due to the division of labor, a number of national industries are outside their state. It is no secret that most European and American companies have located their production facilities in East or Southeast Asia. It turns out that the goods produced for them replenish the GDP of the respective countries.

To assess the value of the national economy, another indicator is used - the Gross National Product, otherwise GNP. It includes the valuation of products of national companies, including those produced abroad. For an accurate assessment of the well-being of the inhabitants of a particular state, it is the GNP that reflects the national income that will be more informative.

Types of GDP

Various approaches are used to estimate GDP. The choice depends on what kind of processes taking place in the country's economy are to be assessed. There are three types of GDP:

• nominal;
• real;

Nominal

Nominal is GDP calculated in current prices at the time of data collection. The disadvantage of this indicator is that it does not take into account inflation, relying solely on current prices. That is, it shows the value of all goods produced and services rendered at the end of the period. Due to inflation, formally, GDP growth can be observed with a real decrease in production.

In reality, nominal GDP reflects only the increase or decrease in the cost of services and goods within the country, and not the dynamics of production. But such an indicator allows economists to draw certain conclusions and forecasts. For example, that as a result of a constant increase in prices, demand will gradually decrease and GDP will begin to fall.

Real

Real GDP inflation takes into account and reflects the growth of production volumes. For calculations, the prices of one of the previous periods, usually the last year, are used. Rosstat, for example, uses price data from 2011 to calculate GDP in 2016.

The advantage of such an indicator is that it expresses precisely the increase in the country's trade turnover. It does not depend on fluctuations in exchange rates or other economic indicators. Based on real GDP, one can draw a conclusion about the current state of the state economy and the processes taking place in it. For example, a crisis will result in a decrease in production in all sectors, and scientific and technological revolution will reduce the cost of production of some goods and cause a rapid growth of others - innovative ones.

In countries with a stable economy, the graphs of real and nominal GDP practically repeat each other. Where inflation processes play a significant role, the picture will be fundamentally different.

Per capita

Marketers are most interested in GDP in terms of the purchasing power (its parity) of the population. For this, the indicator of GDP per capita is used. In the simplest case, the formula will be as follows: we take the GDP and divide it by the population. It is this indicator that is used to compare the economic well-being of countries and their inhabitants.

Other methods can be used to calculate purchasing power. One of the most popular is the so-called unofficial Big Mac Index. Behind a relatively frivolous name that reflects the cost of a popular burger in different countries, there is a fairly reliable indicator that illustrates the economic state of the state.

How to find out the size of GDP

Any resident of the country has access to the official portal of Rosstat, where you can get data on the size of GDP or GNP for various periods. But in order for these data to appear there, GDP must be calculated. There are three main ways to do this. GDP is calculated:

• on expenses;
• by income;
• value added.

Regardless of which method is used, the total amount is the same. This is logical, given that in macroeconomics, the amount of income is always equal to the amount of expenses. The cost of the final product is its added value, therefore, it is this amount that buyers will spend when buying the final product.

By income

Another name for this method of calculating GDP is distribution. The total includes:

• national income;
• net income from abroad;
• indirect taxes (minus subsidies);
• depreciation.

The most multifactorial of the listed components will be the national income. It includes:

• all salaries and incentive payments paid to employees in the country;
• income from land lease received by its owners (private and public);
• interest payments for the use of borrowed funds in production;
• profit of entrepreneurs (including interest on consumer loans and mortgages).

It is noteworthy that this calculation system does not take into account direct taxes and salaries of civil servants. This was done to avoid duplication of indicators. These items fall under budget revenues and are accounted for accordingly.

By expenses

To calculate the size of GDP, the following types of expenditures are taken:

• Consumer. This is the largest part of GDP. They include spending on daily necessities (such as groceries), clothing, durable goods (such as cars or household appliances), and a variety of services (education, transportation, medicine, entertainment, etc.).
• State. They include, first of all, public investment in the economy. As well as the costs associated with the performance of managerial functions (maintenance of government bodies), ensuring national security, etc.
• Investment. These include investments in private companies' own means of production. These can be stocks of raw materials or necessary materials, fixed assets or the construction of industrial buildings. The size of this part can be used to judge the stability of the economic situation.
• net export. The difference between export earnings and spending on imports of goods and services. Another name for this component is the trade balance.

By value added

Otherwise, the production method. Value added, as you know, is the difference between the income received by the company and the cost of goods produced. To obtain GDP, the value added calculated for each industry separately is summed up.