What is Gross Domestic Product ?

Gross Domestic Product (GDP) and Gross National Product (GNP) are two most frequently used economic indicators to measure the strength of economy. There are many differences between GDP and GNP. The main difference between GDP and GNP is that GDP refers to the market value of goods or services produced in a country excluding foreign production in a given period of time, normally a year. On the other hand, GNP stands for the same meaning as GDP but GNP includes the elements of foreign income by domestic citizens, wherever they are living, as well.

In GDP, GDP per capita is often considered an indicator of a country’s standard of living, though it is not a measure of personal income. GDP is regarded as the most important factor in the national economy as the economic growth that is the one of the major economic objectives of any government is normally calculated as GDP. The calculated GDP figure is expressed as the GDP per capita that means the GDP per head.

In that’s way the calculated GDP per capita is then compared with the different countries in order to make the comparisons of economic growth in two or more than two countries. Along with Gross National Product, National Income, and Net National Product, GDP is also a measure that can be used to calculate the size of an economy.

The factors involved in the calculation of GDP are the amount of consumption (C), investment (I), government spending (G), exports (X) and imports (M) in an economy for a fixed time period (quarterly or yearly). When it comes to the total output in an economy then it means that the output of all sectors of an economy mainly primary sector (mining, agriculture, etc.), secondary sector (construction and manufacturing), and tertiary sector that is about services only.

It counts important to mention here that the products and services produced by the nation or citizens of a country in other countries never becomes the part of the domestic GDP rather these become the part of the GDP of that other country only. GDP is the sum of Consumption (C), Investment (I), Government Spending (G) and Net Exports (X – M) i.e., C + I + G + (X - M). (Courtesy: http://www.differencebtw.com/difference-between-gdp-and-gnp/)