Definition of Gross Domestic Product (GDP)

Gross domestic product is the best way to measure a country's economy. GDP is the total value of everything produced by all the people and companies in the country.

GDP is applicable to citizens or foreign-owned companies. If they are in India, the government includes it as a part of their production to their GDP.

The calculation of GDP is down as follows:
Personal Consumption Expenditures plus Business Investment plus Government Spending plus (Exports minus Imports).

Now that you know what the components are, it's easy to calculate a country's gross domestic product using this standard formula: C + I + G + (X-M).

Points to remember:

• There are many different ways to measure a country's GDP:
• Nominal GDP: This measures the increase in prices.
• Real GDP: This compares the economic output of base year with the current year. It also accounts for the consequences on inflation.