Gross product of the country. What is GDP and what is it for

Gross Domestic Product (GDP) is the sum of the values \u200b\u200bof all goods and services produced in the state. Indicated in US dollars. Determined at the end of the fiscal year. By calculating GDP annually, one can track the development of the economy. The change in the indicator may indicate how successful the economic policy has been in the state. Knowledge of how to calculate GDP will help to 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

Calculating the GDP indicator in this way, you need to add up the costs of all participants in the economic process, namely:

Consumer expenditures of citizens (All expenditures that are carried out by households, as well as the state on the maintenance of budgetary organizations, expenditures of non-profit firms for the purchase of personal and shared products, if organizations serve households; at the same time, expenditures are long-term, for example, buying a car, and short-term - the purchase of products, the expenses for the purchase of services, including on credit, are separately allocated);
The aggregate of investments in the economy (Investments are funds invested by an organization or a private person, 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 a saving. Also, the purchase itself securities are not considered an investment if subsequently the company does not use this proceeds to modernize production, etc.)
Government expenditures (Funds spent by the state for the purchase of final goods. This includes salaries to state employees and the purchase of weapons, as well as government investments.)
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 \u003d C + I + G + Xn

In the formula for costs: C - consumer spending, I - investment, G - government. costs and X - the 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 added value of goods manufactured in the country. Value added is one that does not include market prices for products purchased to make a final product or service, hence the value that arose in production. Otherwise, when calculating GDP, some goods / services will be counted twice, and the result will be significantly distorted upward.

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

We get the following formula for calculating GDP:

GDP \u003d DS + NPI - C, where: DS - value added, NPI - tax on production and imports, and C - subsidies on imports and manufacturing.

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 - PFD (from abroad)

in which: salary is the funds spent on employee benefits, P is the cost of rent, Pr is income from interest on, KS is indirect taxes, A is depreciation and PFD is foreign net factor income.

The calculation of GDP is carried out in money, therefore it is necessary to take into account the dynamics of prices during the reporting period. Therefore, there are two types of GDP.

The nominal is determined in terms of current prices. 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 the basis. For example, in the United States - 1996.

Real GDP is an indicator of the volume of production, since an increase or decrease in prices does not change its indicator. To find real GDP, you need to adjust the nominal by the price index. For this, the indicator of nominal GDP must be divided by the price index, which is equal to the ratio of prices in the considered year to prices in the base year.

To bring the nominal GDP to the real indicator, you need to know the consumer price index or. The CPI is influenced by the cost of the 300 most commonly purchased goods, and the GDP deflator summarizes the change in prices for 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 reality it is not.

GDP is a macroeconomic indicator that characterizes the level of development of a state; the sum of all services and goods manufactured in the country for a certain period, expressed in monetary terms. The cost of the gross product includes absolutely everything: from sold travel 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 concept as 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 manufactured only on the territory of the state. However, thanks to the international division of labor, part of the capacity of national enterprises is located outside of it.

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 manufactured by national companies.

Types of gross domestic product

There are three types of gross product:

nominal;
real;
per capita.

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

The nominal gross product is calculated excluding inflation, that is, to determine the rate of growth 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 for the year increased by 11.1 percent. All is good, but nominal GDP does not take into account price increases.

Actually, real GDP takes into account inflation. In 2011, it was at 11.4 percent. Taking into account this fact, the family in 2011 began to live 11.1-11.4 \u003d -0.3 percent worse than last year. These calculations show the financial condition of the family within the country. To compare well-being with families from other countries, the GDP of a Russian family must be converted into dollars - this indicator is called purchasing power per capita.

Find out the level of GDP

Every resident of the country can find out the indicators of GNP or GDP 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 added value;
distribution;
by expenses.

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

The distribution method for calculating gross domestic product includes:

indirect taxes;
depreciation;
net income from trade 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 n does not take into account the salary of civil servants and direct taxes.

The calculation of GDP by expenditure takes into account:

consumer spending - the cost of purchasing goods, clothing, medicine, transport, education, etc .;
investment costs - investments in production, resources, real estate and fixed assets;
government spending - government investment, spending on national security, maintaining the government apparatus;
trade balance.

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

Russia's GDP in 2017

According to the initial estimate of Rosstat, GDP growth in 2017 was 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 inflation index in relation to prices in 2017 was 5.5 percent. The largest revenue growth in the past year was in the entertainment, sports, wholesale and transportation sectors.

The fall in income was observed in health care, construction and education. For end consumers, spending increased by 3.4 percent, while gross capital formation, on the contrary, grew 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 did you think?)
The gross domestic product is one of the most important economic indicators of the country's economic activity. It indicates the market value of all goods and services produced on the territory of the country during the year for the purpose of consumption, export and accumulation, with the exception of the value of intermediate goods and services, that is, raw materials, fuel, energy, feed and others.

This is to avoid re-counting. For example, the cost of a car includes the cost of the iron from which steel is made; steel from which rolled products are obtained; the rental from which the car is made.

GDP - (transcript - Gross Domestic Product) is the most complete indicator of public welfare. It gives an idea of \u200b\u200bthe general material well-being of the nation, since the higher the level of production, the higher the well-being 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 wheat and washing machines, books and tractors, mobile phones and the services of shoemakers and doctors be added.

There is nominal and real GDP. The first is expressed in current prices for a given year. The second is in prices of the previous or any other base year. Real GDP takes into account the extent to which GDP growth is determined by real production 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 unified methodology for determining GDP, developed by the UN statistical service and adopted in most countries of the world.

History of the appearance of calculations of the Gross Domestic Product

The first 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 the calculations of the 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 in 2012 (in million dollars)

USA - 72,440,449
China - 16,244,600
Japan - 8 223 103
Germany - 5 959 718
France - 2 612 878
Great Britain - 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 quantity that shows the total value of goods and services produced. The market price for goods is determined on an annual basis. Experts 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 aimed at investment or immediate consumption. When calculating this indicator, you can find out:

the national income of the country;
the success of economic activities;
the degree of activity of economic entities;
potential trends in macroeconomic processes.

Gross National Product (GNP) means the value of the national economy, which is determined without regard to 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 make an accurate assessment of the well-being of the population. The higher the GNP, the greater 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 prices for services and products, the higher this indicator. Answering the question, what is the nominal GDP, experts need to monitor the dynamics of the price and income index.

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

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

Why you need to determine GDP per capita

This economic value shows the level of material well-being of society. Often, the population's ability to pay is determined by comparing the values \u200b\u200bof GDP per capita.

How to find out the size of GDP

There are 3 main calculation methods used in economics:

value added;
by income;
by expenses.

GDP value added

This calculation technique is called production. It assumes that the measure includes the sum of the value added of the product. In turn, value added is determined by the difference between firms' revenues and production costs. The total value added is calculated after subtracting 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 support 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, you need to add the national income and depreciation, and then subtract from the resulting number the amount of indirect taxes, subsidies provided by the state and the net factor income. To determine the national income, the economist adds up the company's total earnings, interest payments, and the rent and wages of workers.

By performing these calculations, you can find out the operating difference, from which the surplus or deficit arising in the course of production activities is determined. An increase in profit or loss can 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 goods and services of short-term and long-term use. Payments for health care and drugs, utility bills, and rentals are good examples of common costs.

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

Making an investment does not exclude the possibility of exchanging existing assets. The investment segment includes expenses incurred for the acquisition of real estate. Buying financial products cannot be considered an investment as it is considered part of a savings transaction.

Such an element of the formula as government spending is defined as the sum of government spending listed in favor of economic entities. The authorized state bodies are obliged to provide financial support through:

payroll in favor of budget workers;
meeting military needs.

When calculating net exports, you need to find the difference between exports and imports. Exports are defined as the volume of domestic goods supplied to foreign consumers. Import refers to the amount of services and goods received from foreign suppliers.

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

The forecasts of economists, voiced in news stories, often talk about changes in GDP up or down. However, it is rather difficult for unprepared people to understand what exactly this may 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 at stake

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

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

Gross Domestic Product, that is, this is how the abbreviation stands, reflects the cost estimate of all goods and services rendered in the territory of the state for a certain period. The calculation of GDP includes the value of production in all spheres: 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 can be taken for analysis, for example, a quarter, in order to reflect the dynamics of GDP. For ease of comparison, the value of the economy is given in US dollars, as the most stable world currency. However, national currencies can also be used to estimate 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 find themselves outside their state. It is no secret that most of the European and American companies have located their production facilities in East or Southeast Asia. It turns out that the goods produced for them add to the GDP of the respective countries.

To assess the value of the national economy, one more indicator is used - Gross National Product, otherwise GNP. It includes the valuation of the products of national companies, including those made abroad. For an accurate assessment of the well-being of the inhabitants of a particular state, the GNP, which reflects the national income, 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 the GDP calculated at the prices prevailing at the time of data collection. The disadvantage of this indicator is that it does not take inflation into account, 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 decline in production.

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

Real

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

The advantage of this indicator is that it expresses precisely the increase in the country's trade turnover. It is independent of currency fluctuations 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 state will result in a decline in production in all sectors, and scientific and technological revolution will reduce the cost of production of some goods and cause a rapid growth in others - innovative.

In countries with stable economies, the graphs of real and nominal GDP practically repeat each other. Where inflationary processes play an essential role, the picture will be fundamentally different.

Per capita

Marketers are most interested in GDP in terms of 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 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 the relatively frivolous name reflecting the cost of a popular burger in different countries, there is a fairly reliable indicator illustrating the economic state of the state.

How to find out the size of GDP

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

by expenses;
by income;
value added.

Regardless of which method is used, the total is the same. This is logical considering 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, this is the amount that buyers will spend when buying, of course, products.

By income

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

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

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

all salaries and incentive payments paid to employees in the country;
profit 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 the GDP. They include spending on everyday goods (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, state investments in the economy. As well as the costs associated with the implementation of management functions (maintenance of government bodies), ensuring national security, etc.
Investment. These include investments in private companies' own means of production. This can be stocks of raw materials or necessary materials, fixed assets or the construction of industrial buildings. The size of this part can be judged on the stability of the economic situation.
Net export. The difference between export earnings and the cost of importing goods and services. Another name for this component is the trade balance.

Added value

Otherwise, the production method. The added value, 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.