GDP is the final value of the goods and services produced within the geographic boundaries of a country during a specified period of time, normally a year.
GDP growth rate is an important indicator of the economic performance of a country.
To avoid double counting, GDP includes the final value of the product.
The calculation method of GDP is
Personal Expenditure + Gross Investments + Government Spending + (Exports-Imports)
When the economists talk about the size of the economy, it indicates GDP
Nominal GDP – This is the raw measurement that includes price increases
Real GDP – Real GDP is arrived after removing the inflation effects from nominal GDP. Hence real GDP will always be lesser than the Nominal GDP.
Growth Rate – The GDP growth rate is the percentage increase in GDP from quarter to quarter
GDP per capita – It can be arrived dividing GDP by the number of residents. It is a good measure of living standard in a country
Drawbacks of GDP
1. GDP does not count the environmental costs. For example, the price if the plastic is cheap but it does not include the cost of pollution.
2. GDP also does not cover the black economy.
3. GDP does not include unpaid services